Chap 8 9 10 11 13

Chapter 08 The Efficient Market Hypothesis Answer Key

M ultiple Choice Questions

1.

Which of the following beliefs would not preclude charting as a method of portfolio management? A. The market is strong-form efficient. B. The market is semistrong-form efficient. C. The market is weak-form efficient. D. Stock prices follow recurring patterns.

2.

In a 1953 study of stock prices, Maurice Kendall found that ________.

A. there were no predictable patterns in stock prices B. stock prices exhibited strong serial autocorrelation C. day-to-day stock prices followed consistent trends D. fundamental analysis could be used to generate abnormal returns

3.

The weak form of the EMH states that ________ must be reflected in the current stock price.

A. all past information, including security price and volume data B. all publicly available information C. all information, including inside information D. all costless information

4.

The semistrong form of the EMH states that ________ must be reflected in the current stock price. A. all security price and volume data B. all publicly available information C. all information, including inside information D. all costless information

5.

The strong form of the EMH states that ________ must be reflected in the current stock price.

A. all security price and volume data B. all publicly available information C. all information, including inside information D. all costless information

6.

Random price movements indicate ________.

A. irrational