WorksheetsEFFICIENT MARKET HYPOTHESIS
Total questions: 8
Worksheet time: 8mins
Which of the following is a statement of weak form efficiency?
I.
If the markets are efficient in the weak form, then it is impossible to make consistently superior profits by using trading rules based on past returns.
If the markets are efficient in the weak form, then prices will adjust immediately to public information.
If the markets are efficient in the weak form, then prices reflect all information.
The semi-strong form of market efficiency may be tested by measuring how rapidly security prices react to various news items like:
Earnings announcements
Dividend announcements
News of takeovers
News of inflation
One important implication of the efficient market hypothesis is that:
Investors can make profits by engaging in day trading
Investors should hold a diversified portfolio and avoid active trading
Investors should actively review their portfolio to achieve the highest profits
All of the above
An efficient market is defined as one in which:
all participants have the same opportunity to make the make the same returns.
all participants have the same legal rights and transactions costs.
securities’ prices quickly and fully reflect all available information.
securities’ prices are completely in line with the intrinsic value.
If a market is inefficient, as new information is received about a security:
nothing will happen.
the stock price will fall at first and then later rise.
there will be a lag in the adjustment of the stock price
there will be negative demand for the stock.
An efficient market does not require that:
stock prices incorporate all information.
all known information be reflected in prices.
price adjustments occur very quickly.
each adjustment be perfect.
Which of the following is NOT a test of semi-strong form efficiency?
Insider transactions
Stock splits
Accounting changes
Dividend announcements
Which is NOT consider as insider trading:
buying or selling of security by someone who has access to material non public information about security.
can be illegal and legal
Insider trading can beat weak and semi strong EMH
Insider trading can beat strong EMH
