Doubts on Equities Questions in Qbank concerning, statements, difficult

kamara5

Q 1) All else equal, a firm will have a higher PricetoEarnings (P/E) multiple if:
A) return on equity (ROE) is lower.
B) the stock’s beta is lower.
C) retention ratio is higher.
Your answer: C was incorrect. The correct answer was B) the stock’s beta is lower.

Q 2) Which of the following statements concerning the persistence of pricing anomalies is least likely to be correct?
A) When there is no theoretical explanation, an anomaly is difficult to exploit.
B) The capital required to exploit an anomaly is often not available.
C) A lack of liquidity may cause transactions costs to exceed the profit potential of the anomaly.
Your answer: A was incorrect. The correct answer was B) The capital required to exploit an anomaly is often not available.

Q 3) In a wellfunctioning securities market:
A) portfolio managers assist clients with diversifying globally to reduce systematic risk.
B) major news announcements usually coincide.
C) participants have timely information on the prices and volumes of transactions.
Your answer: B was incorrect. The correct answer was C)
My understandingeven B is correct in addition to C because
The “major news announcements usually coincide” they are generally independent

Q 4) David Farrington is an analyst at Farrington Capital Management. He is aware that many people believe that the capital markets are fully efficient. However, he is not convinced and would like to disprove this claim. Which of the following statements would support Farrington in his effort to demonstrate the limitations to fully efficient markets?
A) Processing new information entails costs and takes at least some time, so security prices are not always immediately affected.
B) Stock prices adjust to their new efficient levels within hours of the release of new information.
C) Technical analysis has been rendered useless by many academics who have shown that analyzing market trends, past volume and trading data will not lead to abnormal returns.
Your answer: C was incorrect. The correct answer was A)

Q 5) Assuming market efficiency, which of the following statements regarding technical and fundamental analysis is FALSE?
A) Evidence indicates it is possible to obtain superior returns by investing in midcap firms since they tend to be followed by fewer analysts.
B) The only way to obtain superior results using historical data is to perform a top down analysis examining first the market, then the industry and then individual firms.
C) Technical analysis that relies exclusively on historical data has no value.
Your answer: A was incorrect. The correct answer was B)