Reading 54: Efficient Capital Markets - LOS a, (Part 1) ～

答案和详解如下：

1.If a firm announces an unexpectedly large cash dividend, the efficient market hypothesis (EMH) would predict which of the following price changes at the announcement?

A)   An abnormal price change to occur before the announcement.

B)   An abnormal price change to occur at the time of the announcement.

C)   No price change.

D)   A gradual price change to occur for several weeks after the announcement.

The correct answer was B)

Market efficiency assumes investors adjust their estimate of security prices rapidly to reflect their interpretation of the new information received. Market efficiency also assumes that new information comes to market randomly and is available to all investors at the same time. Therefore, the price should not be reflected prior to the announcement.

2.If the efficient markets hypothesis is true, portfolio managers should do all of the following EXCEPT:

A)   Spend more time working on security selection.

B)   Minimize transaction costs.

C)   Work more with clients to better quantify their risk preferences.

D)   Diversify on a global basis.

The correct answer was A)

In an efficient market all stocks are properly priced and reflect all publicly available information. Therefore, individual selection of stocks is not important the only thing that is relevant is the portfolio’s beta.

3.In an efficient market new information flows:

A)   directly.

B)   in an orderly fashion.

C)   only to insiders.

D)   randomly.

The correct answer was D)

Market efficiency assumes that new information comes to the market in a random fashion and that the timing of news announcements is independent of each other.

4.Which of the following would be inconsistent with an efficient market?

A)   Price changes are independent.

B)   Stock prices adjust rapidly to new information.

C)   Price adjustments are biased.

D)   Information arrives randomly and independently.

The correct answer was C)

Market efficiency assumes that investors adjust their estimates of security prices rapidly to reflect their unbiased interpretation of the new information. New information arrives randomly and independently. Therefore, price changes are independent.

5.Which of the following statements regarding efficient capital markets and its underlying assumptions is FALSE?

A)   Efficient markets require that a large number of profit-maximizing investors come together to collectively analyze and value securities.

B)   In efficient capital markets, current security prices fully reflect all available information.

C)   If the underlying assumptions for efficient capital markets hold true, then price changes are independent and random.

D)   Price adjustments may be imperfect but are unbiased.

The correct answer was A)

Efficient markets require that a large number of competing profit-maximizing participants analyze and value securities independently of one another.