Homework Answers
Answer: The third option is correct
There is no such predetermined time for the information to reach
public. So, it is not an underlying assumption
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Which of the following is NOT an underlying assumption of the existence of an efficient market? A...
Practice Question 6 The theory of market efficiency requires which of the following assumptions? Negligible transaction...
Practice Question 6
The theory of market efficiency requires which of the following
assumptions?
Negligible transaction costs.
A large number of actively traded securities.
Widely available information that is quickly translated into
share price adjustments.
All of the above.
Question 11
In an efficient market,
a. security prices react quickly to new
information.
b. security analysts will not enable investors to
realize superior returns consistently.
c. one cannot make money.
d. a and b are both correct.
The efficient market hypothesis states that current security prices will fully reflect all available information, because...
The efficient market hypothesis states that current security prices will fully reflect all available information, because in an efficient market, all unexploited profit opportunities are eliminated. The elimination of unexploited profit opportunities necessary for a financial market to be efficient does not require that all market participants be well informed. The efficient markets hypothesis implies that stock prices generally follow a random walk.
Which of the following is TRUE of efficient-market hypothesis? Since stocks are fully and fairly priced,...
Which of the following is TRUE of efficient-market hypothesis? Since stocks are fully and fairly priced, it follows that investors should not waste their time trying to find and capitalize on miss-priced (undervalued or overvalued) securities. Securities are typically in disequilibrium, meaning they are fairly priced and their expected returns are more than their required returns. At any point in time, security prices fully reflect all internal information available about the firm and its securities, and these prices are insensitive...
The efficient market hypothesis holds that financial markets price assets at their intrinsic worth, given all...
The efficient market hypothesis holds that financial markets price assets at their intrinsic worth, given all available information. This hypothesis is a key assumption to apply CAPM to estimate expected return of investment by passive investors. Which of the following forms of the efficient market hypothesis defines all available information as publicly announced (or available) one? 1.Weak 2.Semi-weak 3.Semi-strong 4.Strong
The efficient markets hypothesis
1: True or False: The efficient markets hypothesis holds only if all investors are rational.False2: Almost all financial theory and decision models assume that the financial markets are efficient. The informational efficiency of financial markets determines the ability of investors to “beat” the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, they will react rapidly as new relevant information becomes available. Financial theorists have identified three levels of informational efficiency that reflect what...
1. Which of the following statements regarding the efficient market hypothesis (EMH) is incorrect? A)...
1. Which of the following statements regarding the efficient market hypothesis (EMH) is incorrect? A) An efficient market is a perfect market where you cannot make large profits. B) If the market is efficient in its strong form, it reflects all available, public and private, information. The semi-strong form efficiency means that market prices reflect all publicly available information. A market that only reflects the past price and volume information is a weak-form efficient market.
4. Which of the following is an assumption of fundamental analysis? a. Securities markets are efficient....
4. Which of the following is an assumption of fundamental analysis? a. Securities markets are efficient. b. Prices of securities rapidly reflect all publicly available information. c. The strong form of the efficient-markets hypothesis is true. d. Under-priced shares can be found in the securities market by means of financial statement analysis. 5. Which of the following is not a true statement? a. Comparability refers to accounting for similar transactions similarly and different circumstances differently. b. Comparability refers to comparing...
Which of the following statement is TRUE? A: In an efficient market, the only way to...
Which of the following statement is TRUE? A: In an efficient market, the only way to earn higher returns is to invest in riskier securities. B The efficient market hypothesis means that trades can be executed quickly, easily, and inexpensively. C In a semi-strong efficient market, traders with non-public information would have no advantage over those who had only public information. D Even if weak form market efficiency is true, it does not mean that studying charts of past prices...
21. Under the P/E model, stock price is a product of: EPS and DPS P/E ratio and EPS EPS and required return P/E rat...
21. Under the P/E model, stock price is a product of: EPS and DPS P/E ratio and EPS EPS and required return P/E ratio and required return Which is not an assumption of the Efficient Market Theory: Investors are rational The current market price reflects all available information about a security Market prices should swing wildly daily Only new unexpected information can change prices 23. Which level of the Efficient Market Theory assumes that non-publie information is reflected in prices:...
15. Which one of the following statements best defines the efficient market hypothesis? A. Efficient markets...
15. Which one of the following statements best defines the efficient market hypothesis? A. Efficient markets limit competition. B. Security prices in efficient markets remain steady as new information becomes available. C. Mispriced securities are common in efficient markets. D. All securities in an efficient market are zero net present value investments. E. Profits are removed as a market incentive when markets become efficient. 16.A news flash just appeared that caused about a dozen stocks to suddenly drop in value...
Practice Question 6
The theory of market efficiency requires which of the following
assumptions?
Negligible transaction costs.
A large number of actively traded securities.
Widely available information that is quickly translated into
share price adjustments.
All of the above.
Question 11
In an efficient market,
a. security prices react quickly to new
information.
b. security analysts will not enable investors to
realize superior returns consistently.
c. one cannot make money.
d. a and b are both correct.
21. Under the P/E model, stock price is a product of: EPS and DPS P/E ratio and EPS EPS and required return P/E ratio and required return Which is not an assumption of the Efficient Market Theory: Investors are rational The current market price reflects all available information about a security Market prices should swing wildly daily Only new unexpected information can change prices 23. Which level of the Efficient Market Theory assumes that non-publie information is reflected in prices:...
15. Which one of the following statements best defines the efficient market hypothesis? A. Efficient markets limit competition. B. Security prices in efficient markets remain steady as new information becomes available. C. Mispriced securities are common in efficient markets. D. All securities in an efficient market are zero net present value investments. E. Profits are removed as a market incentive when markets become efficient. 16.A news flash just appeared that caused about a dozen stocks to suddenly drop in value...
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