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For each question, select the correct answer then briefly in one or two sentences explain the ratoniale beyond the answer.

(1) Which of the following contradicts the proposition that the stock market is weakly efficient?

(A) An analyst is able to identify mispriced stocks by looking at stock charts.

(B) Mutual funds do not outperform the market on average.

(D) The autocorrelations of stock returns are not significantly different from zero

(2) Which of the following would provide the strongest evidence against the semi-strong form of the efficient market theory?

(A) Fundamental analysis does not help generate abnormal returns.

(B) Technical analysis is worthless in identifying mispriced stocks.

(D) Mutual fund managers do not beat the market on average.

(3) A random walk occurs when

(A) Stock price changes are random but predictable.

(B) Stock prices respond slowly to both new and old information.

(D) Future price changes are uncorrelated with past price changes

(4) Which of the following statements is true about the efficient market hypothesis?

(A) It implies a rational market.

(B) It implies that everyone makes zero profit from trading.

(D) It implies that prices do not fluctuate.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92870594

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