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17 Jun 2018

. If buying stocks that in previous months have increased by more than 20% consistently yields negative abnormal returns, then this violates what form of market efficiency?

a.

Weak-form market efficiency

b.

Semi-strong form market efficiency

c.

Strong form market efficiency

d.

Weak-strong form market efficiency

e.

This does not violate any of the above forms of market efficiency

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Lelia Lubowitz
Lelia LubowitzLv2
17 Jun 2018

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Please show how you got the answers:

What is the approximate 3-year average of the total return for a stock with the following year-end prices: $20, $25, $35 and $32?

Select one:

a. 15.0%

b. 18.8%

c. 20.0%

d. 60.0%

An investor who is highly risk-tolerant will have an indifference curve that

Select one:

a. is relatively steep

b. has a steep, negative slope

c. has a slight, positive slope

d. slopes downward

All of the following statements describe the significance of the Capital Market Line (CML) in the CAPM except:

Select one:

a. the vertical intercept represents the market rate of return

b. it represents the efficient set

c. all investors will hold a portfolio lying on the CML

d. an investor's portfolio will be composed of the market portfolio combined with risk free borrowing or investing

An investor is able to reap abnormally high profits by analyzing a company’s most recent 52-week high and low stock prices. What form of market efficiency does this statement indicate?

Select one:

a. Not even weakly efficient

b. Weak-form efficiency

c. Semi-strong efficiency

d. Strong form efficiency

Which of the following is true regarding the January effect?

Select one:

a. The first few trading days of January display an abnormally positive return on average.

b. The January effect is largely driven by the small-cap effect.

c. On average, the month of January tends to be the worst-performing month.

d. Both a. and b. above are true.

Please answer all of the following questions

1) In a CAPM framework, prohibiting short sales:

a. will prohibit investors from holding the market portfolio in equilibrium.

b. will make the security market line steeper.

c. will encourage investors to hold more riskless assets.

d. will not change the equilibrium.

2) The beta of an efficient portfolio:

a. must be 1 since an efficient portfolio is perfectly positively correlated with the market portfolio.

b. is proportional to 1, depending on the proportion invested in the market portfolio.

c. is equivalent to the portfolio's standard deviation, since standard deviation is the measure of risk for an efficient portfolio.

d. is always less than 1.

3) Which of the following is not a general conclusion of studies of stock prices?

a. The serial correlation in daily returns in U.S. stocks is positive.

b. The serial correlation in longer period returns (monthly, annual) in U.S. stocks is negative.

c. Filter rules greater than 1% generally do not make money.

d. Stocks that have done well in the past are also likely to do well in the future.

e. There are more runs in daily stock prices than we would expect to find under a random walk.

4) In case of a simple CAPM being used to estimate a time series data:

a. the mean of a residual risk should be equal to zero.

b. the regression coefficient should be equal to zero.

c. the difference between the market return and the riskfree rate of return should be equal to zero.

d. the beta of the portfolio should be equal to zero.

5) The fact that superior returns can not be made by selling stocks that cut dividends is evidence of:

a. weak-form efficiency.

b. semi-strong-form efficiency.

c. strong-form efficiency

6) Which of the following is an implication of market efficiency?

a. Resources are allocated among firms that put them to the best use.

b. No investor will do better than the S&P 500 in any time period.

c. No investor will do better than the S&P 500 consistently after adjusting for risk.

d. No investor will do better than the S&P 500 consistently after adjusting for risk and transactions costs.

7) Which of the following is an attribute of futures contract?

a. There are no limits on the size of the position that any investor can take in financial futures markets.

b. Futures contracts are marked to the market on a daily basis

c. Margins for futures are more relative to other types of markets.

d. Almost all futures positions are settled by delivery.

//////////1. Your investment in a small business venture will produce cash flows that increase by 15 percent every year for the next 25 years. This cash flow stream is called: a. an annuity due. b. a growing perpetuity. c. an ordinary annuity. d. a growing annuity. //////////2. If your investment pays the same amount at the end of each year forever, the cash flow stream is called: a. a perpetuity. b. an ordinary annuity. c. an annuity due. d. none of the above. //////////3. George purchased a stock for $45 one year ago. The stock is now worth $65. During the year, the stock paid a dividend of $2.50. What is the total return to George from owning the stock? (Round your answer to the nearest whole percent.) (3 pts) a. 5% b. 44% c. 35% d. 50% //////////4. Barbara purchased a piece of real estate last year for $85,000. The real estate is now worth $102,000. If Barbara needs to have a total return of 25 percent during the year, then what is the dollar amount of income that she needed to have to reach her objective? (4 pts) a. $3,750 b. $4,250 c. $4,750 d. $5,250 //////////5. The risk-free rate of return is currently 3 percent, whereas the market risk premium is 6 percent. If the beta of Lenz, Inc., stock is 1.8, then what is the expected return on Lenz? (4 pts) a. 8.40% b. 10.80% c. 13.80% d. 19.20% //////////6. Which one of the following statements is NOT true? a. Weak-form market efficiency implies that investors who have access to inside or private information will be able to earn abnormal returns. b. Semistrong-form market efficiency implies that investors who have access to inside or private information will be able to earn abnormal returns. c. Strong-form market efficiency implies that investors who have access to inside or private information will be able to earn abnormal returns. d. None of the above. //////////7. Bonds sell at a discount off the par value when market rates for similar bonds are a. Less than the bond

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