Reading 54: Efficient Capital Markets - LOS b, (Part 1) ～ direct, involved, following, efficient, hypothesis

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1.Which of the following has NOT been involved in a direct test of the semistrong form of the efficient market hypothesis (EMH)?

A)   Exchange listing.

B)   NYSE Specialists' returns.

C)   New issues.

D)   Stock splits.

2.Which category of tests assumes that, in an efficient market, securities lie on the security market line?

A)   Event studies.

B)   Cross-sectional tests.

C)   Time-series tests.

D)   Anomaly studies.

3.Which of the following statements about the efficient market hypothesis is FALSE?

A)   Exchange specialists derive above-average returns from private information.

B)   Runs tests are used to test the weak form of the efficient markets hypothesis.

C)   Efficient markets tests have found that professional money managers, as a group, have consistently outperformed the market.

D)   The use of a price weighting versus a market value weighting produces a downward bias on the index.

4.A “runs test” on successive stock price changes which supports the efficient market hypothesis would show that the actual number of runs:

A)   falls into the range expected of a dependent series.

B)   is small.

C)   is large.

D)   falls into the range expected of a random series.

5.A trading rule which signals purchase of a stock if it rises X percent and sale of stock if it falls X percent is known as a:

A)   sieve.

B)   filter.

C)   short sale.

D)   breakout.

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答案和详解如下：

1.Which of the following has NOT been involved in a direct test of the semistrong form of the efficient market hypothesis (EMH)?

A)   Exchange listing.

B)   NYSE Specialists' returns.

C)   New issues.

D)   Stock splits.

The correct answer was B)

Stock exchange specialists tests are a test of the strong-form EMH, because they are related to private or insider information.

2.Which category of tests assumes that, in an efficient market, securities lie on the security market line?

A)   Event studies.

B)   Cross-sectional tests.

C)   Time-series tests.

D)   Anomaly studies.

The correct answer was B)

Cross-sectional tests operate under the assumption that, in an efficient market, all securities must lie directly on the security market line.

3.Which of the following statements about the efficient market hypothesis is FALSE?

A)   Exchange specialists derive above-average returns from private information.

B)   Runs tests are used to test the weak form of the efficient markets hypothesis.

C)   Efficient markets tests have found that professional money managers, as a group, have consistently outperformed the market.

D)   The use of a price weighting versus a market value weighting produces a downward bias on the index.

The correct answer was C)

Professional money managers, as a group, have not been found to outperform the market.

4.A “runs test” on successive stock price changes which supports the efficient market hypothesis would show that the actual number of runs:

A)   falls into the range expected of a dependent series.

B)   is small.

C)   is large.

D)   falls into the range expected of a random series.

The correct answer was D)

The weak form of the efficient market hypothesis argues that, over time, security returns are independent of each other. Runs tests contend that stock price changes (upticks and downticks) are independent over time.

5.A trading rule which signals purchase of a stock if it rises X percent and sale of stock if it falls X percent is known as a:

A)   sieve.

B)   filter.

C)   short sale.

D)   breakout.

The correct answer was B)

Filter rules entail trading stocks when prices move up or down by certain amounts.