Test Bank For Investments Analysis and Behavior 1st Edition Hirschey

Test Bank for Investments Analysis and Behavior, 1st Edition: Hirschey
Test Bank for Investments Analysis and Behavior,

1st Edition: Hirschey
To download the complete and accurate content document, go to:

https://testbankbell.com/download/test-bank-for-investments-analysis-and-behavior-1
st-edition-hirschey/
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6
1. Few will ever be successful in significantly outperforming the market over a short time period.
True False
2. A long run of strong investment performance does not necessarily signify skill.
True False
3. If the stock market is to be perfectly efficient, there must be a large number of buyers and sellers
of essential identical securities, information must be free and readily available, and entry and exit
by market players must be inhibited.
True False
4. In a perfectly efficient market all stocks are equally good buys at all points in time.
True False
5. According to the weak-form hypothesis, trading rules based upon past stock market returns are
futile.
True False
6. According to the semistrong-form hypothesis, not even investors with private information can beat
the market.
True False
7. According to the strong-form hypothesis, current prices reflect all public information and nonpublic
information.
True False
8. In an efficient stock market, it would not be possible to earn above-market returns by buying or
selling stocks on the premise that their prices are trending up.
True False
9. A correlation coefficient of +1.0 indicates perfect inverse correlation.
True False
10. According to the weak-form hypothesis, anything you read in the newspaper, hear on television,
or see on the Internet is already reflected in stock and bond prices.
True False
11. From a statistical perspective, the distribution of daily returns closely resembles a normal
distribution, or bell-shaped curve, with an average daily return around one percent.
True False
12. According to random walk theory, subsequent price changes represent arbitrary departures from
previous prices.
True False
13. The mathematical expectation of the speculator's profit is zero when stock prices follow a random
walk.
True False
14. In practice, daily rates of return on commons stocks have a slight upward bias, or upward drift,
given the long-term positive expectation for investor rates of return.
True False
15. An out-of-sample experiment is a test of any historically useful technical trading rule over some
new sample of data.
True False
16. It is relatively easy to find some mechanical trading rule that would have provided superior
investment returns over some historical time frame even when historical market returns resemble
a table of random numbers.
True False
17. Measuring the success of professional investment management is made difficult by the problems
of finding appropriate investment benchmarks.
True False
18. After expenses, 50% of all portfolio managers can be expected to beat the market.
True False
19. The existence of stock market bubbles is evidence that markets are efficient.
True False
20. Stock prices appear too volatile for the stock market to be considered efficient.
True False
21. An efficient market does not require that:
A. stock prices incorporate all company operating information.

B. all past price information be reflected in current prices.
C. price adjustments occur very quickly.
D. each price adjustment be perfect.
22. Which of the following is a test of strong-form efficiency?
A. stock splits.
B. accounting changes.
C. insider transactions.
D. dividend announcements.
23. Weak form market efficiency:
A. contradicts the random walk hypothesis.

B. incorporates semi-strong form efficiency.
C. is compatible with technical analysis.
D. involves only price and volume information.
24. Statistically testing the independence of stock price changes is a test of:
A. weak form efficiency.

B. semi-strong form efficiency.
C. strong form efficiency.
D. the seasonal effect.
25. In an efficient market:
A. 50% of all investors will outperform the market average after expenses.
B. 50% of all investors will outperform the market average before expenses.
C. less than 50% of all investors will outperform the market average before expenses.
D. less 50% of all investors will underperform the market average after expenses.
26. A random walk with drift reflects the fact that, over time, stock prices tend to:
A. remain stable.
B. rise.
C. fluctuate widely around current prices.
D. fluctuate narrowly around current prices.
27. Positive abnormal returns for investors who buy stock after seeing the 13D filings that publicize
Warren Buffett's common stock investment decisions constitute a violation of:

B. semistrong-form efficiency.
C. strong-form efficiency.
D. none of these.
28. On the day following big "down days," the DJIA tends to:
A. rise substantially.
B. fall precipitously.
C. rise moderately.
D. none of these.
29. The data snooping problem can be avoided by:
A. finding larger returns.

B. study of smaller samples of data.
C. technical trading rules.
D. out-of-sample experiments.
30. The typical pump-and-dump scheme includes:
A. the perpetrator buying illiquid stock at a low price.

B. the perpetrator "touting" the stock.
C. the perpetrator selling when demand increases the stock price.
D. all of the above.
31. Stock market bubbles and subsequent crashes are examples of market:
A. risk aversion.
B. inefficiency.
C. weak form efficiency.
D. strong form efficiency.
32. Which among the following pairs of returns on market indexes are most closely correlated?
A. DJIA and Nasdaq Composite.

B. DJIA and S&P 500.
C. S&P 500 and Nasdaq Composite.
D. DJIA and the Russell 2000.
33. Day traders and other short-term speculators have a difficult time profiting because the:
A. average daily market return is positive.

B. average daily market return is negative.
C. standard deviation of daily market returns is relatively low.
D. standard deviation of daily market returns is relatively high.
34. The highest level of market efficiency is:
A. strong form efficiency.

B. weak form efficiency.
C. semi-strong form efficiency.
D. random walk efficiency.
35. Daily returns for the overall market are:
A. skewed upward.
B. skewed downward.
C. normally distributed with a mean near zero.
D. normally distributed with a mean near 12%-14%.
36. Which among the following statements is not consistent with random walk theory?
A. Stock price movements do not follow any patterns or trends.

B. Past price action cannot be used to predict future price movements.
C. Price changes represent arbitrary departures from previous prices.
D. Big "up days" in the overall market tend to be followed by big "down days."
37. The market-beating success of portfolio managers who rely upon technical analysis gives support
to the:
A. weak form efficient market hypothesis.

B. semistrong form efficient market hypothesis.
C. strong form efficient market hypothesis.
D. none of these.
38. The market-beating success of portfolio managers who rely upon fundamental analysis gives
support to the:

D. none of these.
39. Consistent market-beating results are earned by portfolio managers who employ:
A. technical analysis.
B. fundamental analysis.
C. leverage.
D. none of these.
40. Above-average results tend to be earned by mutual fund managers with:
A. low P/E stocks.

B. low P/B stocks.
C. low operating expenses.
D. low dividend yields.
41. In an efficient stock market:
A. 50% of all professional investors beat the market before expenses.

B. 50% of all professional investors beat the market after expenses.
C. 50% of all individual investors beat the market after expenses.
D. 50% of all investors beat the market after expenses.
42. In an efficient stock market, new information:
A. arrives in a random fashion.

B. arrives in a predictable fashion.
C. is biased.
D. is ignored by insiders and the general public.
43. In an efficient market equilibrium:
A. risk-adjusted returns equal zero.

B. the risk-free return equals zero.
C. abnormal returns equal zero.
D. none of these.
A. future prices move in a random fashion.

B. future returns move in a random fashion.
C. historical returns move in a random fashion.
D. none of these.
45. Day trading does not tend to be profitable because of:
A. transaction costs.
B. low market volatility.
C. trends in stock prices.
D. the fact that no rules outperform a buy-and-hold strategy, even for short periods.
46. In a fair game, the speculator's profit is:
A. zero.
B. the risk-free rate.
C. the nominal market return minus the cost of capital.
D. the market risk premium minus the risk-free rate.
47. In an efficient market, funds run by investment professionals earn a modest:
A. premium to the market before expenses.

B. premium to the market after expenses.
C. discount to the market after expenses.
D. premium to the risk-free rate before expenses.
48. The popular belief that there is an immediate self-correcting process in random events is known
as:
A. the data-snooping problem.

B. a fair game.
C. the gambler's fallacy.
D. none of these.
49. A common benchmark for a portfolio of small capitalization stocks is the:
A. Russell 2000.
B. S&P 500.
C. Wilshire 4500.
D. MSCI EAFE.
50. Pessimistic investors may expect profit growth will be 2% when an unbiased estimated is 3%.
This could cause the market to become:
A. a bubble.
B. highly valued.
C. excessively volatile.
D. under valued.
51. The data snooping problem is a serious problem in studies of:
A. future expectations.
B. unobservable systematic risk.
C. historical data.
D. unobservable unsystematic risk.
52. A Ponzi scheme involves:
A. microcap stock fraud.

B. a pump-and-dump scheme.
C. paying-off old investors from new investors' principle.
D. building a pyramid of investments.
53. If the annual market return over a long period of time is expected to be 12% and the long-term
expected growth rate of stock market firms is 4.5%, the Dow Jones Industrial Average is fairly
valued at 11,000. If pessimistic investors believe the long-term growth rate is only 3.5%, how far
would the DJIA be expected to fall?
54. How can the above-average returns earned by legendary investors such as Warren Buffett and T.
Rowe Price be reconciled with the efficient market hypothesis?
55. The Nasdaq daily return distribution is larger than the dispersion for the S&P 500 Index. What
does a larger dispersion mean and what does this imply about Nasdaq stocks relative to S&P 500
stocks?
6 Key
1. Few will ever be successful in significantly outperforming the market over a short time period.
FALSE
Hirschey - Chapter 06 #1
2. A long run of strong investment performance does not necessarily signify skill.
TRUE
3. If the stock market is to be perfectly efficient, there must be a large number of buyers and
sellers of essential identical securities, information must be free and readily available, and
entry and exit by market players must be inhibited.
FALSE
4. In a perfectly efficient market all stocks are equally good buys at all points in time.
TRUE
5. According to the weak-form hypothesis, trading rules based upon past stock market returns
are futile.
TRUE
6. According to the semistrong-form hypothesis, not even investors with private information can
beat the market.
FALSE
7. According to the strong-form hypothesis, current prices reflect all public information and
nonpublic information.
TRUE
8. In an efficient stock market, it would not be possible to earn above-market returns by buying or
selling stocks on the premise that their prices are trending up.
TRUE
9. A correlation coefficient of +1.0 indicates perfect inverse correlation.
FALSE
10. According to the weak-form hypothesis, anything you read in the newspaper, hear on
television, or see on the Internet is already reflected in stock and bond prices.
FALSE
11. From a statistical perspective, the distribution of daily returns closely resembles a normal
distribution, or bell-shaped curve, with an average daily return around one percent.
FALSE
12. According to random walk theory, subsequent price changes represent arbitrary departures
from previous prices.
TRUE
13. The mathematical expectation of the speculator's profit is zero when stock prices follow a
random walk.
TRUE
14. In practice, daily rates of return on commons stocks have a slight upward bias, or upward drift,
given the long-term positive expectation for investor rates of return.
TRUE
15. An out-of-sample experiment is a test of any historically useful technical trading rule over
some new sample of data.
TRUE
16. It is relatively easy to find some mechanical trading rule that would have provided superior
investment returns over some historical time frame even when historical market returns
resemble a table of random numbers.
TRUE
17. Measuring the success of professional investment management is made difficult by the
problems of finding appropriate investment benchmarks.
TRUE
18. After expenses, 50% of all portfolio managers can be expected to beat the market.
FALSE
19. The existence of stock market bubbles is evidence that markets are efficient.
FALSE
20. Stock prices appear too volatile for the stock market to be considered efficient.
TRUE
A. stock prices incorporate all company operating information.

B. all past price information be reflected in current prices.
C. price adjustments occur very quickly.
D. each price adjustment be perfect.
22. Which of the following is a test of strong-form efficiency?
A. stock splits.
B. accounting changes.
C. insider transactions.
D. dividend announcements.
23. Weak form market efficiency:
A. contradicts the random walk hypothesis.

B. incorporates semi-strong form efficiency.
C. is compatible with technical analysis.
D. involves only price and volume information.
24. Statistically testing the independence of stock price changes is a test of:

B. semi-strong form efficiency.
C. strong form efficiency.
D. the seasonal effect.
25. In an efficient market:
A. 50% of all investors will outperform the market average after expenses.
B. 50% of all investors will outperform the market average before expenses.
C. less than 50% of all investors will outperform the market average before expenses.
D. less 50% of all investors will underperform the market average after expenses.
26. A random walk with drift reflects the fact that, over time, stock prices tend to:
A. remain stable.
B. rise.
C. fluctuate widely around current prices.
D. fluctuate narrowly around current prices.
27. Positive abnormal returns for investors who buy stock after seeing the 13D filings that
publicize Warren Buffett's common stock investment decisions constitute a violation of:

B. semistrong-form efficiency.
C. strong-form efficiency.
D. none of these.
28. On the day following big "down days," the DJIA tends to:
A. rise substantially.
B. fall precipitously.
C. rise moderately.
D. none of these.
29. The data snooping problem can be avoided by:
A. finding larger returns.

B. study of smaller samples of data.
C. technical trading rules.
D. out-of-sample experiments.
30. The typical pump-and-dump scheme includes:
A. the perpetrator buying illiquid stock at a low price.

B. the perpetrator "touting" the stock.
C. the perpetrator selling when demand increases the stock price.
D. all of the above.
31. Stock market bubbles and subsequent crashes are examples of market:
A. risk aversion.
B. inefficiency.
C. weak form efficiency.
D. strong form efficiency.
32. Which among the following pairs of returns on market indexes are most closely correlated?
A. DJIA and Nasdaq Composite.

B. DJIA and S&P 500.
C. S&P 500 and Nasdaq Composite.
D. DJIA and the Russell 2000.
33. Day traders and other short-term speculators have a difficult time profiting because the:
A. average daily market return is positive.

B. average daily market return is negative.
C. standard deviation of daily market returns is relatively low.
D. standard deviation of daily market returns is relatively high.
34. The highest level of market efficiency is:
A. strong form efficiency.

B. weak form efficiency.
C. semi-strong form efficiency.
D. random walk efficiency.
35. Daily returns for the overall market are:
A. skewed upward.
B. skewed downward.
C. normally distributed with a mean near zero.
D. normally distributed with a mean near 12%-14%.
36. Which among the following statements is not consistent with random walk theory?
A. Stock price movements do not follow any patterns or trends.

B. Past price action cannot be used to predict future price movements.
C. Price changes represent arbitrary departures from previous prices.
D. Big "up days" in the overall market tend to be followed by big "down days."
37. The market-beating success of portfolio managers who rely upon technical analysis gives
support to the:

D. none of these.
38. The market-beating success of portfolio managers who rely upon fundamental analysis gives
support to the:

D. none of these.
39. Consistent market-beating results are earned by portfolio managers who employ:
A. technical analysis.
B. fundamental analysis.
C. leverage.
D. none of these.
40. Above-average results tend to be earned by mutual fund managers with:
A. low P/E stocks.

B. low P/B stocks.
C. low operating expenses.
D. low dividend yields.
41. In an efficient stock market:
A. 50% of all professional investors beat the market before expenses.

B. 50% of all professional investors beat the market after expenses.
C. 50% of all individual investors beat the market after expenses.
D. 50% of all investors beat the market after expenses.
42. In an efficient stock market, new information:
A. arrives in a random fashion.

B. arrives in a predictable fashion.
C. is biased.
D. is ignored by insiders and the general public.
43. In an efficient market equilibrium:
A. risk-adjusted returns equal zero.

B. the risk-free return equals zero.
C. abnormal returns equal zero.
D. none of these.
A. future prices move in a random fashion.

B. future returns move in a random fashion.
C. historical returns move in a random fashion.
D. none of these.
45. Day trading does not tend to be profitable because of:
A. transaction costs.
B. low market volatility.
C. trends in stock prices.
D. the fact that no rules outperform a buy-and-hold strategy, even for short periods.
46. In a fair game, the speculator's profit is:
A. zero.
B. the risk-free rate.
C. the nominal market return minus the cost of capital.
D. the market risk premium minus the risk-free rate.
47. In an efficient market, funds run by investment professionals earn a modest:
A. premium to the market before expenses.

B. premium to the market after expenses.
C. discount to the market after expenses.
D. premium to the risk-free rate before expenses.
48. The popular belief that there is an immediate self-correcting process in random events is
known as:
A. the data-snooping problem.

B. a fair game.
C. the gambler's fallacy.
D. none of these.
49. A common benchmark for a portfolio of small capitalization stocks is the:
A. Russell 2000.
B. S&P 500.
C. Wilshire 4500.
D. MSCI EAFE.
50. Pessimistic investors may expect profit growth will be 2% when an unbiased estimated is 3%.
This could cause the market to become:
A. a bubble.
B. highly valued.
C. excessively volatile.
D. under valued.
51. The data snooping problem is a serious problem in studies of:
A. future expectations.
B. unobservable systematic risk.
C. historical data.
D. unobservable unsystematic risk.
52. A Ponzi scheme involves:
A. microcap stock fraud.

B. a pump-and-dump scheme.
C. paying-off old investors from new investors' principle.
D. building a pyramid of investments.
53. If the annual market return over a long period of time is expected to be 12% and the long-term
expected growth rate of stock market firms is 4.5%, the Dow Jones Industrial Average is fairly
valued at 11,000. If pessimistic investors believe the long-term growth rate is only 3.5%, how
far would the DJIA be expected to fall?
54. How can the above-average returns earned by legendary investors such as Warren Buffett
and T. Rowe Price be reconciled with the efficient market hypothesis?
Abnormal stock market returns earned by Warren Buffet and T. Rowe Price could be the
inevitable outliers earned by "lucky" investors, or the normal compensation for their superior
insight or investing capability.

55. The Nasdaq daily return distribution is larger than the dispersion for the S&P 500 Index. What
does a larger dispersion mean and what does this imply about Nasdaq stocks relative to S&P
500 stocks?
Larger dispersion means that the stock prices are more volatile. The Nasdaq index
experiences larger returns in magnitude (both positive and negative) than the S&P 500. This
implies that Nasdaq stocks (and index) have more risk than companies include in the S&P 500
Index.

Test Bank for Investments Analysis and Behavior, 1st Edition: Hirschey
6 Summary
Category # of Questions
Hirschey - Chapter 06 55
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Test Bank for Investments Analysis and Behavior,

To download the complete and accurate content document, go to:

Visit TestBankBell.com to get complete for all chapters

9. A correlation coefficient of +1.0 indicates perfect inverse correlation.

A. stock prices incorporate all company operating information.

22. Which of the following is a test of strong-form efficiency?

23. Weak form market efficiency:

A. contradicts the random walk hypothesis.

A. weak form efficiency.

25. In an efficient market:

A. weak form efficiency.

29. The data snooping problem can be avoided by:

A. finding larger returns.

30. The typical pump-and-dump scheme includes:

A. the perpetrator buying illiquid stock at a low price.

A. DJIA and Nasdaq Composite.

A. average daily market return is positive.

34. The highest level of market efficiency is:

A. strong form efficiency.

35. Daily returns for the overall market are:

A. Stock price movements do not follow any patterns or trends.

A. weak form efficient market hypothesis.

A. weak form efficient market hypothesis.

40. Above-average results tend to be earned by mutual fund managers with:

A. low P/E stocks.

41. In an efficient stock market:

A. 50% of all professional investors beat the market before expenses.

A. arrives in a random fashion.

43. In an efficient market equilibrium:

A. risk-adjusted returns equal zero.

44. An efficient market does not require that:

A. future prices move in a random fashion.

45. Day trading does not tend to be profitable because of:

46. In a fair game, the speculator's profit is:

47. In an efficient market, funds run by investment professionals earn a modest:

A. premium to the market before expenses.

A. the data-snooping problem.

49. A common benchmark for a portfolio of small capitalization stocks is the:

51. The data snooping problem is a serious problem in studies of:

52. A Ponzi scheme involves:

A. microcap stock fraud.

9. A correlation coefficient of +1.0 indicates perfect inverse correlation.

21. An efficient market does not require that:

A. stock prices incorporate all company operating information.

22. Which of the following is a test of strong-form efficiency?

A. contradicts the random walk hypothesis.

A. weak form efficiency.

25. In an efficient market:

A. weak form efficiency.

29. The data snooping problem can be avoided by:

A. finding larger returns.

30. The typical pump-and-dump scheme includes:

A. the perpetrator buying illiquid stock at a low price.

A. DJIA and Nasdaq Composite.

A. average daily market return is positive.

34. The highest level of market efficiency is:

A. strong form efficiency.

35. Daily returns for the overall market are:

A. Stock price movements do not follow any patterns or trends.

A. weak form efficient market hypothesis.

A. weak form efficient market hypothesis.

40. Above-average results tend to be earned by mutual fund managers with: