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) No price change.

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

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

Which of the following is NOT an assumption behind efficient capital markets?

A) Market participants correctly adjust prices to reflect new information.

B) Return expectations implicitly include risk.

C) New information occurs randomly, and the timing of announcements is independent of one another.

An efficient capital market:

A) fully reflects all of the information currently available about a given security, including risk.

B) fully reflects all of the information currently available about a given security, excluding risk.

C) does not fully reflect all of the information currently available about a given security, including risk.

Classifying a capital market as efficient is least likely to imply that:

A) stock prices adjust swiftly to new information.

B) stock price changes are random and unpredictable.

C) corporate insider’s investment performance will consistently exceed the performance of other investors.

Which one of the following is least likely an assumption of efficient capital markets?

A) Market participants correctly adjust prices when new information is received.

B) Risk is included in the pricing of the security.

C) There are a large number of participants that analyze and value securities independently of one another.

Which of the following is NOT an assumption that underlies an efficient capital market?

A) The expected returns implicitly include risk in the price of the security.

B) New information comes to the market in a random fashion and the timing of the news announcements are independent of each other.

C) Investors adjust their estimate of security prices slowly to reflect their interpretation of the new information received.

Which of the following statements regarding efficient capital markets and its underlying assumptions is least accurate?

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

B) Price adjustments may be imperfect but are unbiased.

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

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

A) Price adjustments are biased.

B) Stock prices adjust rapidly to new information.

C) Price changes are independent.

In an efficient market new information flows:

A) directly.

B) randomly.

C) in an orderly fashion.

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

A) Minimize transaction costs.

B) Spend more time working on security selection.

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

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) Semistrong-form EMH.

B) Strong-form EMH.

C) Weak-form EMH.

The strong-form efficient market hypothesis (EMH) asserts that stock prices fully reflect which of the following types of information?

A) Public and private.

B) Public, private, and future.

C) Market.

The semi-strong form of efficient market hypothesis (EMH) asserts that:

A) both public and private information is already incorporated into security prices.

B) all public information is already reflected in security prices.

C) past and future prices exhibit little or no relationship to another.

Which of the following statements is INCORRECT?

A) The weak-form EMH suggests that fundamental analysis will not provide excess returns while the semi-strong form suggests that technical analysis cannot achieve excess returns.

B) The strong-form EMH assumes cost free availability of all information, both public and private.

C) The semi-strong form EMH addresses market and non-market public information.

Which of the following is least likely an assumption behind the semistrong-form of the efficient market hypothesis (EMH)?

A) The timing of news announcements are independent of each other.

B) A large number of profit-maximizing participants.

C) All information is cost-free and available to everyone at the same time.

The strong-form EMH goes beyond the semistrong-form in that it calls for:

A) all non-market public information should be incorporated into security prices.

B) a large number of profit maximizing participants.

C) cost free availability of all information, both public and private.

Which of the following forms of the EMH assumes that no group of investors has monopolistic access to relevant information?

A) Strong-form.

B) Both weak and semistrong form.

C) Weak-form.

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

A) Weak.

B) Strong.

C) Semistrong.

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) fully reflect all publicly available information.

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