1. According to theory, studying historical stock price movements to identify mispriced stocks:    is ineffective even when the market is only weak form efficient.
2. Assume that the market prices of the securities that trade in a particular market fairly reflect the available information related to those securities. Which one of the following terms best defines that market?    efficient capital market
3. Efficient financial markets fluctuate continuously because:   the markets are continually reacting to new information.
4. If you excel in analyzing the future outlook of firms, you would prefer the financial markets be ____ form efficient so that you can have an advantage in the marketplace.    Weak
5. Individuals who continually monitor the financial markets seeking mispriced securities:                    make the markets increasingly more efficient.
6. Inside information has the least value when financial markets are:   strong form efficient
7. Standard deviation is a measure of which one of the following?   volatility
8. The excess return is computed as the:   return on a risky security minus the risk-free rate.
9. the U.S. Securities and Exchange Commission periodically charges individuals with insider trading and claims those individuals have made unfair profits. Given this, you would be most apt to argue that the markets are less than _____ form efficient.  Strong
10. To convince investors to accept greater volatility, you must:   increase the risk premium.
11. Which of the following correspond to a wide frequency distribution?I. relatively low riskII. relatively low rate of returnIII. relatively high standard deviationIV. relatively large risk premium  III and IV only
12. Which of the following statements is correct in relation to a stock investment?I. The capital gains yield can be positive, negative, or zero.II. The dividend yield can be positive, negative, or zero.III. The total return can be positive, negative, or zero.IV. Neither the dividend yield nor the total return can be negative.    I and III
13. Which of the following statements related to market efficiency tend to be supported by current evidence?I. Markets tend to respond quickly to new information.II. It is difficult for investors to earn abnormal returns.III. Short-run prices are difficult to predict accurately based on public information.IV. Markets are most likely weak form efficient.  I, II, III only
14. Which one of the following categories of securities had the lowest average risk premium for the period 1926-2010?   US treasury bills
15. Which one of the following categories of securities has had the most volatile returns over the period 1926-2010?  small company stocks
16. Which one of the following correctly describes the dividend yield?   next year’s annual dividend divided by today’s stock price
17. Which one of the following earned the highest risk premium over the period 1926-2010?        small-company stocks
18. Which one of the following is most indicative of a totally efficient stock market?                                        zero net present values for all stock investments
19. Which one of the following statements best defines the efficient market hypothesis?   All securities in an efficient market are zero net present value investments.
20. Which one of the following statements is correct?   The greater the volatility of returns, the greater the risk premium.
21. Which one of the following statements related to capital gains is correct?   An increase in an unrealized capital gain will increase the capital gains yield.
22. Which two of the following are the most likely reasons why a stock price might not react at all on the day that new information related to the stock issuer is released?I. insiders knew the information prior to the announcementII. investors need time to digest the information prior to reactingIII. the information has no bearing on the value of the firmIV. the information was anticipated   III and IV only
23. You are aware that your neighbor trades stocks based on confidential information he overhears at his workplace. This information is not available to the general public. This neighbor continually brags to you about the profits he earns on these trades. Given this, you would tend to argue that the financial markets are at best _____ form efficient.  Semistrong

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