FIN 440 Mid-term Exam Practice Questions Part I - Chapter 8

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

• all past information, including security price and volume data

• all publicly available information

• all information, including inside information

• all costless information

The semistrong-form of the EMH states that __________ must be reflected in the current stock price.

• all security price and volume data

• all publicly available information

• all information, including inside information

• all costless information

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

• all security price and volume data

• all publicly available information

• all information, including inside information

• all costless information

When the market risk premium rises, stock prices will __________.

• rise

• fall

• recover

• have excess volatility

Proponents of the EMH typically advocate __________.

• a conservative investment strategy

• a liberal investment strategy

• a passive investment strategy

• an aggressive investment strategy

The primary objective of fundamental analysis is to identify __________.

• well-run firms

• poorly run firms

• mispriced stocks

• high P/E stocks

If you believe in the ________ form of the EMH, you believe that stock prices reflect all publicly available information but not information that is available only to insiders.

• semistrong

• strong

• weak

• perfect

If you believe in the __________ form of the EMH, you believe that stock prices reflect all relevant information, including information that is available only to insiders.

• semistrong

• strong

• weak

• perfect

Most of the stock price response to a corporate earnings or dividend announcement occurs within ________.

• about 30 seconds

• about 10 minutes

• 6 months

• 2 years

Choosing stocks by searching for predictable patterns in stock prices is called __________.

• fundamental analysis

• technical analysis

• index management

• random walk investing