1) A successful firm like Microsoft has consistently generated large profits for years. Is this a violation of the EMH?

a) No answer text provided.

b) yes

c) No answer text provided.

d) no

2) Suppose that, after conducting an analysis of past stock prices, you come up with the following observations. Which would appear to contradict the weak form of the efficient market hypothesis?

a) One could have made superior returns by buying stock after a 10% rise in price and selling after a 10% fall.

b) One could have made higher-than-average capital gains by holding stocks with low dividend yields.

c) The average rate of return is significantly greater than zero.

d) The correlation between the return during a given week and the return during the following week is zero.

3) Which of the following statement is true if the efficient market hypothesis holds?

a) It implies that security prices change for no discernible reason.

b) It implies that prices do not fluctuate.

c) It implies that future events can be forecast with perfect accuracy.

d) It implies that prices reflect all available information.

4) Which of the following would be a viable way to earn abnormally high trading profits if markets are semistrong-form efficient?

a) Buy shares in companies with low P/E ratios.

b) Buy shares in companies with recent below-average price changes.

c) Buy shares in companies with recent above-average price changes

d) Buy shares in companies for which you have advance knowledge of an improvement in the management team.

5) Which of the following phenomena would be consistent with the efficient market hypothesis?

a) Stocks that perform well in one week perform poorly in the following week.

b) Stock prices of companies that announce increased earnings in January tend to outperform the market in February.

c) Money managers that outperform the market (on a riskadjusted basis) in one year are likely to outperform in the following year.

d) Nearly half of all professionally managed mutual funds are able to outperform the S&P 500 in a typical year.

6) The anomalies literature

a) provides a conclusive rejection of market efficiency and suggests that several strategies would have provided superior returns.

b) provides a conclusive rejection of market efficiency.

c) provides conclusive support of market efficiency

d) suggests that several strategies would have provided superior returns.