Reading 54: Efficient Capital Markets - LOS a, (Part 2) ～ concerning, efficiency, statements, following, market

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1.Which of the following statements concerning market efficiency is least accurate?

A)   If weak-form market efficiency holds, technical analysis cannot be used to earn abnormal returns over the long-run.

B)   Tests of the semi-strong form of the EMH require that security returns be risk-adjusted using a market model.

C)   An informationally efficient capital market is one in which security prices adjust rapidly and completely to new information.

D)   Market efficiency assumes that individual market participants correctly estimate asset prices.

2.The strong-form EMH asserts that stock prices fully reflect which of the following types of information?

A)   Market.

B)   Market and public.

C)   Public and private.

D)   Public, private, and future.

3.The statement, "Stock prices fully reflect all information from public and private sources," can be attributed to which form of the efficient market hypothesis (EMH)?

A)   Strong-form EMH.

B)   Weak-form EMH.

C)   Semistrong-form EMH.

D)   Semiweak-form EMH.

4.The semi-strong form of the efficient market hypothesis (EMH) asserts that stock prices:

A)   fully reflect all historical price information.

B)   fully reflect all relevant information including insider information.

C)   may be predictable.

D)   fully reflect all publicly available information.

.

5.The reaction of stock prices to the announcement of a stock split is covered by which form of the efficient market hypothesis (EMH)?

A)   Strong.

B)   Semiweak.

C)   Weak.

D)   Semistrong.

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答案和详解如下：

1.Which of the following statements concerning market efficiency is least accurate?

A)   If weak-form market efficiency holds, technical analysis cannot be used to earn abnormal returns over the long-run.

B)   Tests of the semi-strong form of the EMH require that security returns be risk-adjusted using a market model.

C)   An informationally efficient capital market is one in which security prices adjust rapidly and completely to new information.

D)   Market efficiency assumes that individual market participants correctly estimate asset prices.

The correct answer was D)

Market efficiency does not assume that individual market participants correctly estimate asset prices, but does assume that their estimates are unbiased. That is, some agents will over-estimate and some will under-estimate, but they will be correct, on average.

2.The strong-form EMH asserts that stock prices fully reflect which of the following types of information?

A)   Market.

B)   Market and public.

C)   Public and private.

D)   Public, private, and future.

The correct answer was C)

The strong-form EMH assumes that stock prices fully reflect all information from public and private sources.

3.The statement, "Stock prices fully reflect all information from public and private sources," can be attributed to which form of the efficient market hypothesis (EMH)?

A)   Strong-form EMH.

B)   Weak-form EMH.

C)   Semistrong-form EMH.

D)   Semiweak-form EMH.

The correct answer was A)

This is the definition of the strong-form EMH. Private sources include insider information, such as persons holding monopolistic access to information relevant to the formation of prices.

4.The semi-strong form of the efficient market hypothesis (EMH) asserts that stock prices:

A)   fully reflect all historical price information.

B)   fully reflect all relevant information including insider information.

C)   may be predictable.

D)   fully reflect all publicly available information.

The correct answer was D)

The semi-strong form of the EMH asserts that security prices fully reflect all publicly available information. This would include all historical information. The weak form relates to historical information only. The strong form relates to public and private information.

5.The reaction of stock prices to the announcement of a stock split is covered by which form of the efficient market hypothesis (EMH)?

A)   Strong.

B)   Semiweak.

C)   Weak.

D)   Semistrong.

The correct answer was D)

The semistrong form of the EMH asserts that security prices fully reflect all publicly available information. Announcement type information such as that related to stock splits is an example of publicly available information.