Reading 54: Efficient Capital Markets - LOS b, (Part 1) ～ following, examples, examine, returns, style

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6.Which of the following are examples of tests used to examine the statistical independence of past returns?

A)   Filter rules tests.

B)   Excess Return tests.

C)   Event study tests.

D)   Runs tests.

7.Runs tests” involve which form of the efficient markets hypothesis (EMH)?

A)   Semistrong-form.

B)   Strong-form.

C)   Weak-form.

D)   They are used to test all three forms.

8.Tests of trading rules based on available market data are tests of which form of the efficient markets hypothesis (EMH)?

A)   Strong-form

B)   Semistrong-form.

C)   Weak-form.

D)   They are used to test all three forms.

9.If statistical tests of stock returns over time support the efficient market hypothesis, the resulting correlations should be:

A)   lagged.

B)   negative.

C)   zero.

D)   positive.

10.Which of the following statements about efficient capital markets and the efficient market hypothesis is FALSE?

A)   The semistrong form of the market efficiency hypothesis states that prices fully reflect all information from public sources.

B)   Efficient capital markets assume that information comes to the market in a random fashion.

C)   Market efficiency assumes that investors implicitly include risk in the price of a security.

D)   Filter rules in stock trading have been shown to produce above-average rates of return, even after including transactions costs.

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答案和详解如下：

6.Which of the following are examples of tests used to examine the statistical independence of past returns?

A)   Filter rules tests.

B)   Excess Return tests.

C)   Event study tests.

D)   Runs tests.

The correct answer was D)

Both the runs and the autocorrelation tests are used to examine the statistically independence of past returns. Filter rule tests have been conducted to see if investors can earn excess returns following mechanical trading rules based on price data.

7.Runs tests” involve which form of the efficient markets hypothesis (EMH)?

A)   Semistrong-form.

B)   Strong-form.

C)   Weak-form.

D)   They are used to test all three forms.

The correct answer was C)

Statistical tests of the independence of security returns are used to examine the weak form of the EMH. Autocorrelation and runs tests are tests for independence over time.

8.Tests of trading rules based on available market data are tests of which form of the efficient markets hypothesis (EMH)?

A)   Strong-form

B)   Semistrong-form.

C)   Weak-form.

D)   They are used to test all three forms.

The correct answer was C)

Trading rule tests are used to examine the weak form of the EMH. Most evidence suggests that technical trading rules do not produce superior returns after adjusting for transaction costs and taxes.

9.If statistical tests of stock returns over time support the efficient market hypothesis, the resulting correlations should be:

A)   lagged.

B)   negative.

C)   zero.

D)   positive.

The correct answer was C)

There should be zero correlation between observations, or all observations should be independent of each other, if the weak-form EMH is true.

10.Which of the following statements about efficient capital markets and the efficient market hypothesis is FALSE?

A)   The semistrong form of the market efficiency hypothesis states that prices fully reflect all information from public sources.

B)   Efficient capital markets assume that information comes to the market in a random fashion.

C)   Market efficiency assumes that investors implicitly include risk in the price of a security.

D)   Filter rules in stock trading have been shown to produce above-average rates of return, even after including transactions costs.

The correct answer was D)

Filter rules have not been shown to produce above-average rates of return after accounting for transactions costs.