Someone who invests in the hedge funds could most accurately be described as using which approach?

Multiple Choice

• Technical management

• Active management

• Arbitrage management

• Passive investment

Which of the following contradicts the proposition that the stock market is semistrong-form efficient?

Multiple Choice

• Over 25% of mutual funds outperform the market on average.

• Insiders earn abnormal trading profits.

• Applications of technical trading rules fail to earn abnormal returns.

• Every January, the stock market earns above-normal returns.

Assume that a company announces unexpectedly low earnings in a particular quarter. In an efficient market one might expect _____________.

Multiple Choice

• an abnormal price increase before the announcement

• an abnormal price increase immediately after the announcement

• an abnormal price decrease after the announcement

• no abnormal price change before or after the announcement

Which of the following statements is (are) not correct?

Multiple Choice

• If a market is semistrong-form efficient, it is also weak-form efficient.

• If a market is weak-form efficient, it is also semistrong-form efficient.

• If a market is strong-form efficient, it is also semistrong- and weak-form efficient.

• None of the above.

An implication of the efficient market hypothesis is that __________.

Multiple Choice

• high-beta stocks are consistently overpriced

• stocks are consistently fairly priced

• nonzero beta will quickly disappear

• low-beta stocks are consistently overpriced

Which of the following is (are) the characteristics of growth stocks? I. Higher prices and higher risk. II. Higher price/earnings ratio but lower price/book ratio. III. Higher beta.

IV. Higher alpha.

Multiple Choice

• I and III only

• I, III and IV only

• II and III only

• III only