Ebook Economics of Money Banking and Financial Markets Fifth Canadian Edition Canadian 5Th Edition Mishkin Test Bank Full Chapter PDF

Economics of Money Banking and
Financial Markets Fifth Canadian

Edition Canadian 5th Edition Mishkin
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Economics of Money, Banking & Financial Markets, 5e (Mishkin)
Chapter 7 The Stock Market, the Theory of Rational Expectations, and the Efficient
Market Hypothesis
7.1 Computing the Price of Common Stock
1) A stockholder's ownership of a company's stock gives her the right to ________.

A) vote and be the primary claimant of all cash flows
B) vote and be the residual claimant of all cash flows
C) manage and assume responsibility for all liabilities
D) vote and assume responsibility for all liabilities
Answer: B
Diff: 1 Type: MC Page Ref: 138
Skill: Recall
Objective List: 7.1 Illustrate how stocks are valued as the present value of dividends
2) Stockholders' rights include ________.

A) the right to vote
B) the right to manage
C) primary claims on all cash flows
D) ownership of bonds
Answer: A
Skill: Recall
3) Stockholders' rights include ________.

A) the right to manage
B) the right to change personnel policy
C) the right to veto management's decisions
D) residual claim on all of a company's assets
Answer: D
Skill: Recall
4) Stockholders are residual claimants, meaning that they ________.

A) have the first priority claim on all of a company's assets
B) are liable for all of a company's debts
C) will never share in a company's profits
D) receive the remaining cash flow after all other claims are paid
Answer: D
Skill: Recall
182
© 2014 Pearson Canada Inc.
5) Common stock is the principal way that corporations raise ________.
A) short-term debt
B) foreign exchange
C) long-term debt
D) equity capital
Answer: D
Skill: Recall
6) Dividends are paid from ________.

A) liabilities
B) debts
C) net earnings
D) interest
Answer: C
Skill: Recall
7) Periodic payments of net earnings to shareholders are known as ________.

A) capital gains
B) dividends
C) profits
D) interest
Answer: B
Skill: Recall
8) The value of any investment is found by computing the ________.

A) present value of all future sales
B) present value of all future liabilities
C) future value of all future expenses
D) present value of all future cash flows
Answer: D
Skill: Recall
183
9) The value of any investment is found by computing the ________.
A) present value of all coupon payments
B) present value of all future liabilities
C) future value of all dividends
D) value in today's dollars of all future cash flows
Answer: D
Skill: Recall
10) In the one-period valuation model, the value of a share of stock today depends upon
________.
A) the present value of both dividends and the expected sales price
B) only the present value of the future dividends
C) the actual value of the dividends and expected sales price received in one year
D) the future value of dividends and the actual sales price
Answer: A
Skill: Recall
11) In the one-period valuation model, the current stock price increases if ________.
A) the expected sales price increases
B) the expected sales price falls
C) the required return increases
D) dividends are cut
Answer: A
Skill: Recall
12) In the one-period valuation model, an increase in the required return on investments in equity
________.
A) increases the expected sales price of a stock
B) increases the current price of a stock
C) reduces the expected sales price of a stock
D) reduces the current price of a stock
Answer: D
Skill: Recall
184
13) In the one-period valuation model with no dividend payments the current price of the stock is
given by ________.
A) P0 =
B) P0 = +
C) P0 = × 100
D) P0 = × 365
Answer: A
Skill: Recall
14) Using the one-period valuation model, assuming a year-end dividend of $0.11, an expected
sales price of $110, and a required rate of return of 10 percent, the current price of the stock
would be ________.
A) $110.11
B) $121.12
C) $100.10
D) $100.11
Answer: C
Skill: Applied
15) Using the one-period valuation model, assuming a year-end dividend of $1.00, an expected
sales price of $100, and a required rate of return of 5 percent, the current price of the stock would
be ________.
A) $110.00
B) $101.00
C) $100.00
D) $96.19
Answer: D
Skill: Applied
185
16) The analysts predict that the price of corporation's XYZ stock one year from now will be
$22. XYZ announced that is not going to pay dividends next year. You decide that you would be
satisfied to earn a 10 percent on the investment on this stock, thus, this stock is worth ________
for you now.
A) $20
B) $22
C) $24
D) $18
Answer: A
Skill: Applied
17) The analysts predict that the price of corporation's XYZ stock one year from now will be
$120. XYZ announced that is not going to pay dividends next year. You decide that you would
be satisfied to earn a 20 percent on the investment on this stock, thus, this stock is worth
________ for you now.
A) $100
B) $120
C) $130
D) $90
Answer: A
Skill: Applied
18) General Electric announces that it is going to cut its dividends by $0.02 per share in the
future. This, everything else remaining the same, will cause its current stock price to ________.
A) increase
B) decrease
C) remain the same
D) fluctuate
Answer: B
Skill: Applied
19) In the generalized dividend model, if the expected sales price is in the distant future
________.
A) it does not affect the current stock price
B) it is more important than dividends in determining the current stock price
C) it is equally important with dividends in determining the current stock price
D) it is less important than dividends but still affects the current stock price
Answer: A
Diff: 2 Type: MC Page Ref: 138-139
Skill: Recall
186
20) In the generalized dividend model, a future sales price far in the future does not affect the
current stock price because ________.
A) the present value cannot be computed
B) the present value is almost zero
C) the sales price does not affect the current price
D) the stock may never be sold
Answer: B
Skill: Recall
21) In the generalized dividend model, the current stock price is the sum of ________.
A) the actual value of the future dividend stream
B) the present value of the future dividend stream
C) the future value of the future dividend stream
D) the present value of the future sales price
Answer: B
Skill: Recall
22) Using the Gordon growth model, a stock's price will increase if ________.
A) the dividend growth rate increases
B) the growth rate of dividends falls
C) the required rate of return on equity rises
D) the expected sales price rises
Answer: A
Skill: Recall
23) In the Gordon growth model, a decrease in the required rate of return on equity ________.
A) increases the current stock price
B) increases the future stock price
C) reduces the future stock price
D) reduces the current stock price
Answer: A
Skill: Applied
187
24) Using the Gordon growth formula, if D1 is $2.00, ke is 12 percent or 0.12, and g is 10
percent or 0.10, then the current stock price is ________.
A) $20
B) $50
C) $100
D) $150
Answer: C
Skill: Applied
25) Using the Gordon growth formula, if D1 is $1.00, ke is 10 percent or 0.10, and g is 5 percent
or 0.05, then the current stock price is ________.
A) $10
B) $20
C) $30
D) $40
Answer: B
Skill: Applied
26) One of the assumptions of the Gordon Growth Model is that dividends will continue growing
at ________ rate.
A) an increasing
B) a fast
C) a constant
D) an escalating
Answer: C
Skill: Recall
27) In the Gordon Growth Model, the growth rate is assumed to be ________ the required return
on equity.
A) greater than
B) equal to
C) less than
D) proportional to
Answer: C
Skill: Recall
188
28) The price earnings ratio (PE) is a measure of how much the market is willing to pay for $1 of
________ from a firm.
A) earnings
B) dividends
C) assets
D) stock
Answer: A
Skill: Recall
29) What is the current price of a telecommunication company's stock if earnings per share are
projected to be $1.50 per share and the industry's average PE ratio is $30?
A) $45
B) $20
C) $31.50
D) $28.50
Answer: A
Skill: Applied
30) What is the current price of a telecommunication company's stock if earnings per share are
projected to be $2.00 per share and the industry's average PE ratio is $20?
A) $40
B) $10
C) $22
D) $18
Answer: A
Skill: Applied
31) You believe that a corporation's dividends will grow 5 percent on average into the
foreseeable future. If the company's last dividend payment was $5 what should be the current
price of the stock assuming a 12 percent required return?
Answer: Use the Gordon Growth Model.
$5(1 + .05)/(.12-.05) = $75
Diff: 3 Type: SA Page Ref: 140
Skill: Applied
189
32) What rights does ownership interest give stockholders?
Answer: Stockholders have the right to vote on issues brought before the stockholders, be the
residual claimant, that is, receive a portion of any net earnings of the corporation, and the right to
sell the stock.
Skill: Recall
33) Explain the Gordon growth model of stock pricing. Explain how changes in each component
affect the current stock price. On what assumptions is the model based?
Answer: The basic model is
0=
where
P0 = the current stock price
D1 = the next period's dividend
ke = the required rate of return
g = the dividend growth rate
Increases in the dividend or the dividend growth rate increase the stock price, while an increase
in the required rate of return lowers the stock price.
The two assumptions that are the basis of the model are that dividends are assumed to grow at a
constant rate, and that the dividend growth rate is less than the required rate of return.
Skill: Recall
34) Describe the Price Earnings Valuation method for stocks.

Answer: Students must explain that the price earnings ration (PE) is a widely watched measure
of how much the market is willing to pay for $1 of earnings from a firm. A high PE has two
interpretations: a. The market expects earnings to rise in the future, b. The market feels that the
firm's earnings are very low risk and is therefore willing to pay a premium for them. The price to
earnings ratio is: PE = .

Skill: Recall
190
7.2 How the Market Sets Stock Prices
1) In asset markets, an asset's price is ________.

A) set equal to the highest price a seller will accept
B) set equal to the highest price a buyer is willing to pay
C) set equal to the lowest price a seller is willing to accept
D) set by the buyer willing to pay the highest price
Answer: D
Skill: Applied
Objective List: 7.2 Determine how information in the market affects asset prices
2) Information plays an important role in asset pricing because it allows the buyer to more
accurately judge ________.
A) liquidity
B) risk
C) capital
D) policy
Answer: B
Skill: Recall
3) New information that might lead to a decrease in an asset's price might be ________.
A) an expected decrease in the level of future dividends
B) a decrease in the required rate of return
C) an expected increase in the dividend growth rate
D) an expected increase in the future sales price
Answer: A
Skill: Applied
4) A change in perceived risk of a stock changes ________.

A) the expected dividend growth rate
B) the expected sales price
C) the required rate of return
D) the current dividend
Answer: C
Skill: Recall
191
5) A stock's price will fall if there is ________.
A) a decrease in perceived risk
B) an increase in the required rate of return
C) an increase in the future sales price
D) current dividends are high
Answer: B
Skill: Applied
6) A monetary expansion ________ stock prices due to a decrease in the ________ and an
increase in the ________, everything else held constant.
A) reduces; future sales price; expected rate of return
B) reduces; current dividend; expected rate of return
C) increases; required rate of return; future sales price
D) increases; required rate of return; dividend growth rate
Answer: D
Skill: Applied
7) The subprime financial crisis lead to a decline in stock prices because ________.
A) of a lowered expected dividend growth rate
B) of a lowered required return on investment in equity
C) higher expected future stock prices
D) higher current dividends
Answer: A
Skill: Applied
8) Increased uncertainty resulting from the subprime crisis ________ the required return on
investment in equity.
A) raised
B) lowered
C) had no impact on
D) decreased
Answer: A
Skill: Applied
192
9) In October 2008, the stock market crashed, falling by ________ from its peak value a year
earlier.
A) over 40 percent
B) over 30 percent
C) over 50 percent
D) over 25 percent
Answer: A
Skill: Applied
10) An increase in uncertainty for the economy will ________.

A) increase stock prices due to a higher required return
B) not affect stock prices
C) increase stock prices due to a lower required return
D) depress stock prices due to a higher required return
Answer: D
Skill: Applied
11) Dishonest corporate accounting procedures would cause stock prices to ________.
A) remain unchanged
B) decrease due to lower expected dividend growth and lower required return
C) decrease due to lower expected dividend growth and higher required return
D) increase due to higher expected dividend growth and lower required return
Answer: C
Skill: Applied
193
7.3 The Theory of Rational Expectations
1) Economists have focused more attention on the formation of expectations in recent years. This
increase in interest can probably best be explained by the recognition that ________.
A) expectations influence the behavior of participants in the economy and thus have a major
impact on economic activity
B) expectations influence only a few individuals, have little impact on the overall economy, but
can have important effects on a few markets
C) expectations influence many individuals, have little impact on the overall economy, but can
have distributional effects
D) models that ignore expectations have little predictive power, even in the short run
Answer: A
Skill: Recall
2) The view that expectations change relatively slowly over time in response to new information
is known in economics as ________.
A) rational expectations
B) irrational expectations
C) slow-response expectations
D) adaptive expectations
Answer: D
Skill: Recall
3) If expectations of the future inflation rate are formed solely on the basis of a weighted average
of past inflation rates, then economics would say that expectation formation is ________.
A) irrational
B) rational
C) adaptive
D) reasonable
Answer: C
Skill: Recall
194
4) If expectations are formed adaptively, then people ________.
A) use more information than just past data on a single variable to form their expectations of that
variable
B) often change their expectations quickly when faced with new information
C) use only the information from past data on a single variable to form their expectations of that
variable
D) never change their expectations once they have been made
Answer: C
Skill: Recall
5) If during the past decade the average rate of monetary growth has been 5 percent and the
average inflation rate has been 5 percent, everything else held constant, when the Bank of
Canada announces that the new rate of monetary growth will be 10 percent, the adaptive
expectation forecast of the inflation rate is ________.
A) 5 percent
B) between 5 and 10 percent
C) 10 percent
D) more than 10 percent
Answer: A
Skill: Applied
6) The major criticism of the view that expectations are formed adaptively is that ________.
A) this view ignores the fact that people use more information than just past data to form their
expectations
B) it is easier to model adaptive expectations than it is to model rational expectations
C) adaptive expectations models have no predictive power
D) people are irrational and therefore never learn from past mistakes
Answer: A
Skill: Recall
195
7) In rational expectations theory, the term "optimal forecast" is essentially synonymous with
________.
A) correct forecast
B) the correct guess
C) the actual outcome
D) the best guess
Answer: D
Skill: Recall
8) If a forecast is made using all available information, then economists say that the expectation
formation is ________.
A) rational
B) irrational
C) adaptive
D) reasonable
Answer: A
Skill: Recall
9) If a forecast made using all available information is not perfectly accurate, then it is
________.
A) still a rational expectation
B) not a rational expectation
C) an adaptive expectation
D) a second-best expectation
Answer: A
Skill: Recall
10) If additional information is not used when forming an optimal forecast because it is not
available at that time, then expectations are ________.
A) obviously formed irrationally
B) still considered to be formed rationally
C) formed adaptively
D) formed equivalently
Answer: B
Skill: Recall
196
11) An expectation may fail to be rational if ________.
A) relevant information was not available at the time the forecast is made
B) relevant information is available but ignored at the time the forecast is made
C) information changes after the forecast is made
D) information was available to insiders only
Answer: B
Skill: Recall
12) According to rational expectations theory, forecast errors of expectations ________.

A) are more likely to be negative than positive
B) are more likely to be positive than negative
C) tend to be persistently high or low
D) are unpredictable
Answer: D
Skill: Recall
13) Rational expectations forecast errors will on average be ________ and therefore ________
be predicted ahead of time.
A) positive; can
B) positive; cannot
C) negative; can
D) zero; cannot
Answer: D
Skill: Recall
14) People have a strong incentive to form rational expectations because ________.
A) they are guaranteed of success in the stock market
B) it is costly not to do so
C) it is costly to do so
D) everyone wants to be rational
Answer: B
Skill: Applied
197
15) If market participants notice that a variable behaves differently now than in the past, then,
according to rational expectations theory, we can expect market participants to ________.
A) change the way they form expectations about future values of the variable
B) begin to make systematic mistakes
C) no longer pay close attention to movements in this variable
D) give up trying to forecast this variable
Answer: A
Skill: Recall
16) According to rational expectations, ________.

A) expectations of inflation are viewed as being an average of past inflation rates
B) expectations of inflation are viewed as being an average of expected future inflation rates
C) expectations formation indicates that changes in expectations occur slowly over time as past
data change
D) expectations will not differ from optimal forecasts that use all available information
Answer: D
Skill: Recall
17) Suppose Barbara looks out in the morning and sees a clear sky so decides that a picnic for
lunch is a good idea. Last night the weather forecast included a 100 percent chance of rain by
midday but Barbara did not watch the local news program. Is Barbara's prediction of good
weather at lunch time rational? Why or why not?
Answer: No, this prediction does not use rational expectations. Although Barbara based her
guess on the information that was available to her at the time, additional information was readily
available that could have been used to improve her prediction.
Diff: 3 Type: SA Page Ref: 144-146
Skill: Applied
18) Assume that your economics professor announces to your class that after thirty years of
giving exams only on scheduled dates, this semester she will give only surprise quizzes. What is
the rational expectation response to this new policy? Why does your self-interest require that you
change your behavior? What would the consequences be for students who changed their
expectations about exams adaptively?
Answer: Instead of being able to study for exams on known dates, students must now be
prepared for an exam at any possible time. Students must study regularly, before each class. Self-
interest dictates that students change their behavior, as their grade depends upon it. Students who
change their behavior adaptively don't adjust until they have experienced one or more surprise
quizzes, which in all likelihood hurt their grades.
Skill: Applied
198
7.4 The Efficient Market Hypothesis: Rational Expectations in Financial Markets
1) The theory of rational expectations, when applied to financial markets, is known as ________.
A) monetarism
B) the efficient markets hypothesis
C) the theory of strict liability
D) the theory of impossibility
Answer: B
Skill: Recall
2) Monetary economists and financial economists developed ________ theories on expectations

formations.
A) parallel
B) opposing
C) dissimilar
D) unusual
Answer: A
Skill: Recall
3) If the optimal forecast of the return on a security exceeds the equilibrium return, then
________.
A) the market is inefficient
B) no unexploited profit opportunities exist
C) the market is in equilibrium
D) the market is myopic
Answer: A
Skill: Recall
4) Another way to state the efficient markets condition is: in an efficient market, ________.
A) unexploited profit opportunities will be quickly eliminated
B) unexploited profit opportunities will never exist
C) unexploited profit opportunities never existed
D) every financial market participant must be well informed about securities
Answer: A
Skill: Recall
199
5) ________ occurs when market participants observe returns on a security that are larger than
what is justified by the characteristics of that security and take action to quickly eliminate the
unexploited profit opportunity.
A) Arbitrage
B) Mediation
C) Asset capitalization
D) Market intercession
Answer: A
Skill: Recall
6) The efficient markets hypothesis suggests that if an unexploited profit opportunity arises in an
efficient market, ________.
A) it will tend to go unnoticed for some time
B) it will be quickly eliminated
C) financial analysts are your best source of this information
D) prices will reflect the unexploited profit opportunity
Answer: B
Skill: Recall
7) Financial markets quickly eliminate unexploited profit opportunities through changes in

________.
A) dividend payments
B) tax laws
C) asset prices
D) monetary policy
Answer: C
Skill: Applied
8) The elimination of unexploited profit opportunities requires that ________ market participants
be well informed.
A) all
B) a few
C) zero
D) many
Answer: B
Skill: Recall
200
9) If in an efficient market all prices are correct and reflect market fundamentals, which of the
following is a false statement?
A) A stock that has done poorly in the past is more likely to do well in the future
B) One investment is as good as any other because the securities' prices are correct
C) A security's price reflects all available information about the intrinsic value of the security
D) Security prices can be used by managers to assess their cost of capital accurately
Answer: A
Skill: Applied
10) According to the efficient markets hypothesis, purchasing the reports of financial analysts
________.
A) is likely to increase one's returns by an average of 10 percent
B) is likely to increase one's returns by about 3 to 5 percent
C) is not likely to be an effective strategy for increasing financial returns
D) is likely to increase one's returns by an average of about 2 to 3 percent
Answer: C
Skill: Recall
11) You have observed that the forecasts of an investment advisor consistently outperform the
other reported forecasts. The efficient markets hypothesis says that future forecasts by this
advisor ________.
A) may or may not be better than the other forecasts Past performance is no guarantee of the
future
B) will always be the best of the group
C) will definitely be worse in the future What goes up must come down
D) will be worse in the near future, but improve over time
Answer: A
Skill: Recall
12) Sometimes one observes that the price of a company's stock falls after the announcement of
favorable earnings. This phenomenon is ________.
A) clearly inconsistent with the efficient markets hypothesis
B) consistent with the efficient markets hypothesis if the earnings were not as high as anticipated
C) consistent with the efficient markets hypothesis if the earnings were not as low as anticipated
D) consistent with the efficient markets hypothesis if the favorable earnings were expected
Answer: B
Skill: Recall
201
13) According to the efficient markets hypothesis, the current price of a financial security
________.
A) is the discounted net present value of future interest payments
B) is determined by the highest successful bidder
C) fully reflects all available relevant information
D) is a result of none of the above
Answer: C
Skill: Recall
14) You read a story in the newspaper announcing the proposed merger of Dell Computer and
Gateway. The merger is expected to greatly increase Gateway's profitability. If you decide to
invest in Gateway stock, you can expect to earn ________.
A) above average returns since you will share in the higher profits
B) above average returns since your stock price will definitely appreciate as higher profits are
earned
C) below average returns since computer makers have low profit rates
D) a normal return since stock prices adjust to reflect expected changes in profitability almost
immediately
Answer: D
Skill: Applied
15) The efficient markets hypothesis indicates that investors ________.

A) can use the advice of technical analysts to outperform the market
B) do better on average if they adopt a "buy and hold" strategy
C) let too many unexploited profit opportunities go by if they adopt a "buy and hold" strategy
D) do better if they purchase loaded mutual funds
Answer: B
Skill: Recall
16) The efficient markets hypothesis suggests that investors ________.

A) should purchase no-load mutual funds which have low management fees
B) can use the advice of technical analysts to outperform the market
C) let too many unexploited profit opportunities go by if they adopt a "buy and hold" strategy
D) act on all "hot tips" they hear
Answer: A
Skill: Recall
202
17) The advantage of a "buy-and-hold strategy" is that ________.
A) net profits will tend to be higher because there will be fewer brokerage commissions
B) losses will eventually be eliminated
C) the longer a stock is held, the higher will be its price
D) profits are guaranteed
Answer: A
Skill: Recall
18) For small investors, the best way to pursue a "buy and hold" strategy is to ________.
A) buy and sell individual stocks frequently
B) buy no-load mutual funds with high management fees
C) buy no-load mutual funds with low management fees
D) buy load mutual funds
Answer: C
Skill: Recall
19) A situation when an asset price differs from its fundamental value is ________.
A) a random walk
B) an inflation
C) a deflation
D) a bubble
Answer: D
Skill: Recall
20) In a rational bubble, investors can have ________ expectations that a bubble is occurring but
continue to hold the asset anyway.
A) irrational
B) adaptive
C) rational
D) myopic
Answer: C
Skill: Recall
203
21) If a corporation announces that it expects quarterly earnings to increase by 25 percent and it
actually sees an increase of 22 percent, what should happen to the price of the corporation's stock
if the efficient markets hypothesis holds, everything else held constant?
Answer: The stock's price should fall. The price had adjusted based on the statement of expected
earnings. When the actual number turned out to be lower than expected, the stock price changes
to reflect the additional information.
Skill: Applied
22) Your best friend calls and gives you the latest stock market "hot tip" that he heard at the
health club. Should you act on this information? Why or why not?
Answer: No, if this information is readily available, it will already be reflected in the stock
price.
Skill: Applied
23) If you your stock broker tells you that you should buy stock in Ford as it has devised a new
hybrid engine system that will reduce consumption of fuel by 90 percent, would you follow this
advice and buy Ford's stock?
Answer: The efficient market hypothesis indicates that you should be skeptical of any such
information. If the market is efficient then it has already priced Ford's stock so that its expected
return will equal the equilibrium return. The tip is not valuable. But if the tip is based on new
information and gives you an edge on the rest of the market, only them it can be valuable to you
and you should buy the stock. In any other case Ford stock price will have already reflected the
news.
Skill: Applied
24) What is a recommended strategy for a small investor and how it is associated with the
efficient market hypothesis?
Answer: Students should be able to explain that a recommended strategy is to purchase no-load
mutual funds. EMH suggests that only "extremely clever investors" may be able top outperform
a buy-and-hold strategy.
Skill: Recall
204
7.5 Behavioral Finance
1) ________ is the field of study that applies concepts from social sciences such as psychology
and sociology to help understand the behavior of securities prices.
A) Behavioral finance
B) Strategical finance
C) Methodical finance
D) Procedural finance
Answer: A
Skill: Recall
2) If a market participant believes that a stock price is irrationally high, they may try to borrow
stock from brokers to sell in the market and then make a profit by buying the stock back again
after the stock falls in price. This practice is called ________.
A) short selling
B) double dealing
C) undermining
D) long marketing
Answer: A
Skill: Recall
3) ________ means people are more unhappy when they suffer losses than they are happy when
they achieve gains.
A) Loss fundamentals
B) Loss aversion
C) Loss leader
D) Loss cycle
Answer: B
Skill: Recall
4) Loss aversion can explain why very little ________ actually takes place in the securities
market.
A) short selling
B) bargaining
C) bartering
D) negotiating
Answer: A
Skill: Recall
205
5) Psychologists have found that people tend to be ________ in their own judgments.
A) underconfident
B) overconfident
C) indecisive
D) insecure
Answer: B
Skill: Recall
6) ________ and ________ may provide an explanation for stock market bubbles.
A) Overconfidence; social contagion
B) Underconfidence; social contagion
C) Overconfidence; social isolationism
D) Underconfidence; social isolationism
Answer: A
Skill: Recall
7.6 Web Appendix: Evidence on the Efficient Market Hypothesis
1) If a mutual fund outperforms the market in one period, evidence suggests that this fund is
________.
A) highly likely to consistently outperform the market in subsequent periods due to its superior
investment strategy
B) likely to under-perform the market in subsequent periods to average its overall returns
C) not likely to consistently outperform the market in subsequent periods
D) not likely to outperform the market in any subsequent period
Answer: C
Diff: 2 Type: MC Page Ref: 7A.1-1 -2
Topic: Questions for Web Appendix on the Efficient Market Hypothesis
Skill: Recall
Objective List: Appendix: Evidence on the Efficient Market Hypothesis
2) Studies of mutual fund performance indicate that mutual funds that outperformed the market
in one time period usually ________.
A) beat the market in the next time period
B) beat the market in the next two subsequent time periods
C) beat the market in the next three subsequent time periods
D) do not beat the market in the next time period
Answer: D
Diff: 1 Type: MC Page Ref: 7A.1-1 - 2
Skill: Recall
206
3) The number and availability of discount brokers has grown rapidly since the mid-1970s. The
efficient markets hypothesis predicts that people who use discount brokers ________.
A) will likely earn lower returns than those who use full-service brokers
B) will likely earn about the same as those who use full-service brokers, but will net more after
brokerage commissions
C) are going against evidence suggesting that full-service brokers can help outperform the
market
D) are likely to outperform the market by a wide margin
Answer: B
Diff: 2 Type: MC Page Ref: 7A.1-2
Skill: Recall
4) When Happy Feet Corporation announces that their fourth quarter earnings are up 10 percent,
their stock price falls. This is consistent with the efficient markets hypothesis ________.
A) if earnings were not as high as expected
B) if earnings were not as low as expected
C) if a merger is anticipated
D) the company just invented a new bunion product
Answer: A
Skill: Recall
5) To say that stock prices follow a "random walk" is to argue that stock prices ________.
A) rise, then fall, then rise again
B) rise, then fall in a predictable fashion
C) tend to follow trends
D) cannot be predicted based on past trends
Answer: D
Skill: Recall
207
6) The efficient markets hypothesis predicts that stock prices follow a "random walk." The
implication of this hypothesis for investing in stocks is ________.
A) a "churning strategy" of buying and selling often to catch market swings
B) turning over your stock portfolio each month, selecting stocks by throwing darts at the stock
page
C) a "buy and hold strategy" of holding stocks to avoid brokerage commissions
D) following the advice of technical analysts
Answer: C
Skill: Recall
7) Rules used to predict movements in stock prices based on past patterns are, according to the
efficient markets hypothesis, ________.
A) a waste of time
B) profitably employed by all financial analysts
C) the most efficient rules to employ
D) consistent with the random walk hypothesis
Answer: A
Skill: Recall
8) Tests used to rate the performance of rules developed in technical analysis conclude that
technical analysis ________.
A) outperforms the overall market
B) far outperforms the overall market, suggesting that stockbrokers provide valuable services
C) does not outperform the overall market
D) does not outperform the overall market, suggesting that stockbrokers do not provide services
of any value
Answer: C
Skill: Recall
208
9) Which of the following accurately summarizes the empirical evidence about technical
analysis?
A) Technical analysts fare no better than other financial analysis—on average they do not
outperform the market.
B) Technical analysts tend to outperform other financial analysis, but on average they
nevertheless underperform the market.
C) Technical analysts fare no better than other financial analysis, and like other financial analysts
they outperform the market.
D) Technical analysts fare no better than other financial analysis, and like other financial
analysts they underperform the market.
Answer: A
Skill: Recall
10) Evidence in support of the efficient markets hypothesis includes ________.

A) the failure of technical analysis to outperform the market
B) the small-firm effect
C) the January effect
D) excessive volatility
Answer: A
Skill: Recall
11) Evidence against market efficiency includes ________.

A) failure of technical analysis to outperform the market
B) the random walk behavior of stock prices
C) the inability of mutual fund managers to consistently beat the market
D) the January effect
Answer: D
Skill: Recall
209
12) The small-firm effect refers to the ________.
A) negative returns earned by small firms
B) returns equal to large firms earned by small firms
C) abnormally high returns earned by small firms
D) low returns after adjusting for risk earned by small firms
Answer: C
Skill: Recall
13) The January effect refers to the fact that ________.

A) most stock market crashes have occurred in January
B) stock prices tend to fall in January
C) stock prices have historically experienced abnormal price increases in January
D) the football team winning the Super Bowl accurately predicts the behavior of the stock
market for the next year
Answer: C
Skill: Recall
14) When a corporation announces a major decline in earnings, the stock price may initially
decline significantly and then rise back to normal levels over the next few weeks. This impact is
called ________.
A) the January effect
B) mean reversion
C) market overreaction
D) the small-firm effect
Answer: C
Skill: Recall
15) A phenomenon closely related to market overreaction is ________.

A) the random walk
B) the small-firm effect
C) the January effect
D) excessive volatility
Answer: D
Skill: Recall
210
16) Excessive volatility refers to the fact that ________.
A) stock returns display mean reversion
B) stock prices can be slow to react to new information
C) stock price tend to rise in the month of January
D) stock prices fluctuate more than is justified by dividend fluctuations
Answer: D
Skill: Recall
17) Mean reversion refers to the fact that ________.

A) small firms have higher than average returns
B) stocks that have had low returns in the past are more likely to do well in the future
C) stock returns are high during the month of January
D) stock prices fluctuate more than is justified by fundamentals
Answer: B
Skill: Recall
211
Another random document with
no related content on Scribd:
WILLIAM II., German Emperor.
Some of his autocratic speeches against the Social Democrats.
See (in this volume)

GERMANY: A. D. 1894-1895.

His claim to kingship by Divine Right.

GERMANY: A. D.1894-1899.

His message to President Kruger relative to the Jameson Raid.

SOUTH AFRICA (THE TRANSVAAL): A. D. 1896 (JANUARY).

His speech to his brother, Prince Henry, at Kiel.

GERMANY: A. D. 1897 (NOVEMBER-DECEMBER).

His speech to soldiers departing to China.
Punishment of its critics.

GERMANY: A. D. 1900 (OCTOBER 9).

His system of personal government.

GERMANY: A. D. 1900 (NOVEMBER-DECEMBER).
WILMINGTON, NORTH CAROLINA:
Race war.

NORTH CAROLINA: A. D. 1898.
WIRELESS TELEGRAPHY.

SCIENCE, RECENT: ELECTRICAL.
WITU. The State of.

BRITISH EAST AFRICA PROTECTORATE: A. D. 1895-1897.
WITWATERSRAND, The.

SOUTH AFRICA (THE TRANSVAAL): A. D. 1885-1890.
WOLCOTT, Senator Edward O.:

Bimetallic mission to Europe.

MONETARY QUESTIONS: A. D. 1897 (APRIL-OCTOBER).
WOMAN SUFFRAGE.
Four States have given to women unlimited political freedom,

these States being Colorado, Utah, Wyoming, and Idaho. The
women of all these States, except Idaho, had the privilege of
voting in the Presidential election of 1896. The women of
Idaho voted in the State election of 1898, but their first
chance to vote for a Presidential ticket was in 1900. To some
extent, in the election of school boards and officers, or on
questions of taxation, woman suffrage exists in a limited way
in Arizona, Connecticut, Delaware, Illinois, Iowa, Kentucky,
Massachusetts, Michigan, Minnesota, Montana, Nebraska, New
Hampshire, New York, North Dakota, Ohio, Oklahoma, Oregon,
South Dakota, Texas, Vermont, Washington and Wisconsin.
WOMAN'S CENTURY, The.

NINETEENTH CENTURY. THE WOMAN'S CENTURY.
WOOD, Leonard, Colonel

of the Regiment of Rough Riders.

UNITED STATES OF AMERICA: A. D. 1898 (APRIL-MAY).
WOOD, Leonard, Colonel

Commanding at Santiago.
Report.

CUBA: A. D. 1898-1899 (DECEMBER-OCTOBER)
WOOD, Leonard, Colonel.

Military Governor of Cuba.

CUBA: A. D. 1809 (DECEMBER).
WORKINGMEN'S INSURANCE, Compulsory, in Germany.

GERMANY: A. D. 1897-1900.
WORKMEN'S COMPENSATION ACT, English.

ENGLAND: A. D. 1897 (MAY-JULY).
WORLD POWERS, The four great.

NINETEENTH CENTURY: EXPANSION.
X.
X RAYS. The discovery of.

SCIENCE, REGENT: CHEMISTRY AND PHYSICS.
Y.
YAMAGATA, Marquis: Ministry.

JAPAN: A. D. 1898-1899.
YANG-TSUN, Battle of.

CHINA: A. D. 1900 (AUGUST 4-16).
YANG-TSZE REGION, Chinese agreement not to alienate.

CHINA: A. D. 1898 (FEBRUARY).
YAQUIS, Revolts of the.

MEXICO: A. D. 1896-1899.
YAUCO, Engagement at.

UNITED STATES OF AMERICA:
A. D. 1898 (JULY-AUGUST: PORTO RICO).
YELLOW FEVER, Detection of the mosquito as a carrier of.

SCIENCE, RECENT: MEDICAL AND SURGICAL.
YERKES OBSERVATORY, The.
The Yerkes Observatory, built and equipped for the University

of Chicago, by Mr. Charles T. Yerkes, of Chicago, at the
village of Williams Bay, near Lake Geneva, Wisconsin, was
opened and dedicated on the 21st of October, 1897. A
remarkable gathering of eminent astronomers gave distinction
to the occasion. The Observatory was pronounced to be the most
perfectly equipped in the world. The lens of its great
telescope—40 inch objective—the last great work of the late
Alvan G. Clark, of Cambridge, Massachusetts was then the
largest ever made. Its cost was $66,000; the cost of the
equatorial mounting was $55,000.
YOUNG PEOPLE'S SOCIETY OF CHRISTIAN ENDEAVOR.

CHRISTIAN ENDEAVOR, YOUNG PEOPLE'S SOCIETY OF.
YUKON, The district of.

CANADA: A. D. 1895.
{701}
Z.
ZAMBESIA, Northern.

SOUTH AFRICA (BRITISH SOUTH AFRICA COMPANY):
A. D. 1894-1895.
ZANZIBAR: A. D. 1895.
Mainland divisions of the Sultanate included
in British East Africa Protectorate.

BRITISH EAST AFRICA PROTECTORATE: A. D. 1895-1897.
British suppression of an usurper.

AFRICA: A. D. 1896 (ZANZIBAR).
Abolition of the legal status of slavery.

AFRICA: A. D. 1897 (ZANZIBAR).
Renunciation of rights of extra-territoriality by Germany.

SAMOAN ISLANDS.
ZIONIST MOVEMENT, The.

JEWS: A. D. 1897-1901.
ZULULAND:
Extension of boundary.

AFRICA: A. D. 1895 (ZULULAND).
ZULULAND:
Annexation to Natal Colony.

AFRICA: A. D. 1897 (ZULULAND).
ZOLA, Emile, and the Dreyfus case.

FRANCE: A. D. 1897-1899, and 1900 (DECEMBER).
ZONA LIBRE.

MEXICAN FREE ZONE.
{702}
CHRONOLOGICAL RECORD OF EVENTS.

1895-1901.
1895.
January 1, 1895.
Murder of the reigning prince of Chitral,
on the northwestern Indian border.
January 7, 1895.
Independence of Korea proclaimed at Seoul.
January 13, 1895.
Death of Sir John Seeley (Professor John Robert Seeley).
January 17, 1895.

Election of M. Felix Faure President of the French Republic.
January 21, 1895.

Agreement between Great Britain and France defining the
boundaries of the hinterland of Sierra Leone.
January 22-23, 1895.

Resignation of President Saenz Peña of the Argentine
Republic, and election of President Uriburu.
January 24, 1895.

Death of Lord Randolph Churchill.
January 26, 1895.

Death of Arthur Cayley, English mathematician.
Death of Nikolai Karlovich de Giers, Russian statesman.
January 28, 1895.

Death of François Canrobert, Marshal of France.
February 7, 1895.
Rejection by the United States House of Representatives of
the measure asked for by President Cleveland for the relief
of the national treasury.
February 8, 1895.
Contract by the United States Secretary of the Treasury with
New York and London banking houses for supply of gold to
the treasury.
Death of Reginald Stuart Poole, English archæologist.
February 12, 1895.

Death of Charles Etienne Gayarré, historian of Louisiana.
February 16, 1895.
Death of Lady Stanley of Alderley.
February 18, 1895.

Death of Archduke Albrecht of Austria.
February 20, 1895.

Death of Frederick Douglass, the most eminent colored man
of his day.
February 24, 1895.

Renewal of insurrection in Cuba against Spanish rule.
March 1, 1895.
Beginning of the siege of a small force of British-Indian
troops in the fort at Chitral by surrounding tribes.
March 2, 1895.
Death of the Grand Duke Alexis,
brother of the Tzar Alexander III.
Death of Professor John Stuart Blackie.
Death of Ismail Pasha, ex-Khedive of Egypt.
March 5, 1895.
Death of Sir Henry Rawlinson, English archæologist.
March 9, 1895.
Death of Leopold von Sacher-Masoch, German novelist.
March 11, 1895.

Agreement between Great Britain and Russia for fixing the
northern frontier of Afghanistan from Zulfikar on the
Heri-Rud to the Pamirs.
March 17, 1895.

Bloody battle in the streets of Lima, Peru, ending in the
overthrow of the usurping government of Caceres.
March 18, 1895.

Death of Captain Adam Badeau, military
biographer of General Grant.
March 31, 1895.

Death of Sir George Chesney, military writer.
April 20, 1895.

Relief of the beleaguered British garrison at Chitral.
April 30, 1895.

Death of Gustav Freytag, German novelist.
May 1, 1895.
Proclamation by the British South Africa Company giving
the name "Rhodesia" to its territories.
May 4, 1895.
Death of Roundell Pulmer, 1st Earl of Selborne.
May 5, 1895.
Death of Karl Vogt, German biologist.
May 6, 1895.
Re-hearing granted by the Supreme Court of the United States
on cases testing constitutionality of the income tax.
May 10, 1895.

Relinquishment by Japan of the Fêng-tien peninsula in China.
Census of the Argentine Republic.
May 20, 1895.

Final decision of the Supreme Court of the United States
against the constitutionality of the income tax.
May 23, 1895.
Consolidation of the Astor and Lenox libraries with the
"Tilden Trust," to form the New York Public Library.
May 24, 1895.

Death of Hugh McCulloch, American statesman and financier.
May 28, 1895.

Death of Walter Quinton Gresham,
United States Secretary of State.
May 30, 1895.

Death of Frederick Locker-Lampson, English poet.
May 31, 1895.

Death of Emily Faithfull, philanthropist and author.
June 14, 1895.

Census of the German Empire.
June 17, 1895.

Celebration of the opening of the Kaiser Wilhelm Ship Canal
between the Baltic and North seas.
June 21-22, 1895.

Defeat in the British Parliament and resignation of the
Ministry of Lord Rosebery;
Lord Salisbury called to form a new government.
June 29, 1895.

Death of Professor Thomas Henry Huxley,
English biologist and scientific man of letters.
{703}
July 1, 1895.
Final transfer of the territories of the British East Africa
Company to the British government;
completed organization of the East Africa Protectorate.
July 8, 1895.
Opening of the railway from Delagoa Bay to Pretoria,
in the Transvaal.
July 13, 1895.

Parliamentary elections begun in Great Britain, resulting in a
large majority for the Conservatives and Liberal Unionists.
July 15, 1895.

Assassination of Mr. Stambouloff, late chief Minister in the
Bulgarian government, who died of his wounds on the 19th.
July 20, 1895.

Pressing despatch of Mr. Olney, United States Secretary of
State, to the American Ambassador to Great Britain, on the
question of the Venezuela boundary, asserting the Monroe
Doctrine.
July 21, 1895.

Death of Professor Rudolph von Gneist, German jurist and
historian.
July 24, 1895.

Defeat of Protectionist policy in the Parliamentary election,
New South Wales.
July 31, 1895.

Death of Heinrich von Sybel, historian, and Director of the
Prussian State Archives.
Death of Richard M. Hunt, American architect.
August 1, 1895.
Massacre of English and American missionaries at Hua Sang
in China.
August 2, 1895.
Death of Joseph Thomson, African explorer.
August 12, 1895.

Opening of the first session of the new Parliament in
Great Britain.
August 13, 1895.

Death of Christian Bernhard Tauchnitz, Leipzig publisher.
September 2, 1895.
Government of a young native prince, under British tutelage
and protection established at Chitral.
September 16-18, 1895.

Adoption of a constitution and organization of a republican
government by the Cuban insurgents.
September 18, 1895.

Opening of the Cotton States and International Exposition
at Atlanta.
September 20, 1895.

Executive order by President Cleveland for the improvement
of the consular service of the United States.
September 28, 1895.

Death of Louis Pasteur, the father of bacteriology.
September 30, 1895.

Attack by Turkish police in Constantinople on Armenians who
had gathered to present their grievances to the Sultan.
October 3, 1895.
Death of Professor Hjalmar Hjorth Boyesen, Norwegian-American
novelist and poet.
October 7, 1895.
Death of William Wetmore Story, American sculptor and author.
October 8-9, 1895.

Massacre of Armenians at Trebizond by a Turkish mob.
October 17, 1895.

Turkish imperial irade directing reforms in Armenia which
were not carried out.
October 21, 1895.

Death of Henry Reeve, English author and editor.
November 4, 1895.
Revolutionary installation of Aloy Alfaro as executive chief
of the Republic of Ecuador.
Death of Eugene Field, American poet and journalist.
November 8, 1895.
Discovery of the X rays by Professor Rontgen.
November 9, 1895.
Death of Colonel Benjamin Wait, a leader of the Canadian
rebellion of 1837.
November 20, 1895.

Death of Chimelli de Marini, known as Rustem Pasha.
November 25, 1895.

More rigorous anti-slavery law instituted in Egypt.
Death of Jules Barthélemy Saint-Hilaire, French statesman
and orientalist.
November 26, 1895.

Reply of Lord Salisbury, for the British government,
to the despatch of Mr. Olney, on the Venezuela question.
Death of Henry Seebohm, English naturalist.
November 27, 1895.

Death of Alexandre Dumas, the younger.
November 29, 1895.

Death of Count Edward Taaffe, Austrian statesman.
December 8, 1895.
Death of George Augustus Sala, English journalist.
December 12, 1895.

Death of Allen G. Thurman,
American political leader and statesman.
December 17, 1895.

Message of President Cleveland to the Congress of the
United States on the boundary dispute between
Great Britain and Venezuela.
Death of Antonio Gallenga (Luigi Mariotti),
Italian revolutionist, journalist, and author.
December 18-20, 1895.

Passage by the two branches of the Congress of the United
States of an act authorizing the President to appoint a
commission to ascertain the true boundary of Venezuela.
December 20, 1895.

Special Message of President Cleveland to the Congress of
the United States on the financial situation of the country.
December 23, 1895.

Death of "Stepniak," Russian revolutionist and author.
Death of John Russell Hind, English astronomer.
December 27-28, 1895.

Passage of temporary tariff bill and bill to maintain the
coin redemption fund, by the United States House of
Representatives.
December 29, 1895.

Raid by Dr. Jameson, Administrator of the British South Africa
Company, into the Transvaal, with an armed force of 500 men.
1896.
January 1, 1896.
Appointment of an United States Commission to investigate the
divisional line between Venezuela and British Guiana.
Surrender of Dr. Jameson and his raiders to the Boers.
New constitution for South Carolina brought into effect.
January 3, 1896.
Congratulatory telegram from the German Emperor, William II.,
to President Kruger, of the South African Republic,
on the defeat of the Jameson Raid.
January 8, 1896.
Destructive earthquake shock in Persia.
Death of Paul Verlaine, French poet.
January 10, 1896.

Proclamation of President Kruger to the inhabitants of
Johannesburg, promising them a municipal government.
January 11, 1896.

Death of João de Deus, Portuguese poet.
{704}
January 15, 1896.

Declaration of agreement between Great Britain and France
concerning Siam.
January 17, 1896.
Occupation of Kumassi, the capital of Ashanti, by British
forces, and submission of King Prempeh.
January 18, 1896.

Submission by the Queen of Madagascar to a
French protectorate of the island.
January 20, 1896.

Death of Prince Henry of Battenberg.
January 24, 1896.

Death of Lord Leighton, English painter.
January 29, 1896.

Death of the Right Honourable Hugh Culling Eardley Childcrs,
ex-Chancellor of the Exchequer, Great Britain.
February 1, 1896.
Substitution, by the United States Senate, of a free silver
coinage bill for the House bill to maintain the coin
redemption fund.
February 6, 1896.
Death of Jean Auguste Barre, French sculptor.
February 8, 1896.
Signing of treaty between United States and Great Britain for
the arbitration of British claims for seizure of sealing vessels.
February 10, 1896.

Arrival of General Weyler at Havana as Governor and
Captain-General of Cuba.
February 11, 1896.

Notification by the French government to the Powers that it
had taken final possession of Madagascar.
February 14, 1896.

Rejection by the United States House of Representatives of
the Senate substitute for its bill to maintain the coin
redemption fund.
February 16, 1896.

Promulgation of Weyler's concentration order in Cuba.
February 25, 1896.

Defeat of the House tariff bill in the United States Senate.
February 26, 1896.

Death of Arsène Houssaye, French author.
February 27, 1896.

Reopening of a discussion of the Venezuela boundary question
between the governments of the united States and Great Britain.
March 1, 1896.
Defeat of the Italians by the Abyssinians at Adowa.
March 5, 1896.
Suggestion by Lord Salisbury of a general treaty of
arbitration between the United States and Great Britain.
March 10-12, 1896.

Passage of the Raines Liquor Law by the two branches of the
New York Legislature.
March 21, 1896.

Beginning of the Anglo-Egyptian movement for the recovery of
the Sudan from the Dervishes.
March 22, 1896.

Death of Thomas Hughes, author of "Tom Brown's School Days."
March 24, 1896.
Death of President Hippolyte of the Haytien Republic.
March 28, 1896.

Death of Mrs. Elizabeth Charles, English author.
March 30, 1896.

Resumption of the authority of the Pope over the Coptic Church,
and re-establishment of the Catholic patriarchate of
Alexandria.
March 31, 1896.

Reopening of the military and naval service of the United
States to persons who had held commissions in the Confederate
army or navy during the civil war.
April 6, 1896.
Revival of Olympic games at Athens.
April 8.
Highest latitude reached by Dr. Nansen, within 261 statute
miles of the north pole.
April 11, 1896.

Death of Charilaos Trikoupis, Greek statesman.
April 21, 1896.

Death of Jean Baptiste Léon Say, French statesman.
Death of Baron Hirsch, financier
and millionaire-philanthropist.
April 24, 1896.

Promulgation of amendments to the constitution of the
Republic of Mexico.
April 26, 1896.

Death of Sir Henry Parkes, Australian statesman.
May 1, 1896.
Opening of German industrial exposition at Berlin.
Assassination of the Shah of Persia.
Promulgation of additional amendments to the Mexican
constitution.
May 2, 1896.
Opening of the great national exposition and festival at
Buda-Pesth to celebrate the millennium of the
kingdom of Hungary.
May 3, 1896.
Death of Alfred William Hunt, English artist.
May 4, 1896.
Opening of the National Electrical Exposition in New York.
May 6, 1896.
Promulgation of civil service rules by President Cleveland,
adding 29,000 places to the classified service under the
government of the United States.
May 11, 1896.

The bill to consolidate New York, Brooklyn, and neighboring
cities, in the "Greater New York," made law by the
Governor's signature.
May 19, 1896.

Promulgation of the law of public education in Mexico,
establishing a national system.
Publication in England of the manifesto of a New Radical Party,
led by Sir Charles Dilke and Mr. Labouchere.
Death of the Archduke Karl Ludwig of Austria.
May 20, 1896.

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Economics of Money Banking and

Financial Markets Fifth Canadian

7.1 Computing the Price of Common Stock

1) A stockholder's ownership of a company's stock gives her the right to ________.

2) Stockholders' rights include ________.

3) Stockholders' rights include ________.

4) Stockholders are residual claimants, meaning that they ________.

6) Dividends are paid from ________.

7) Periodic payments of net earnings to shareholders are known as ________.

8) The value of any investment is found by computing the ________.

34) Describe the Price Earnings Valuation method for stocks.

Diff: 2 Type: SA Page Ref: 141

1) In asset markets, an asset's price is ________.

4) A change in perceived risk of a stock changes ________.

10) An increase in uncertainty for the economy will ________.

12) According to rational expectations theory, forecast errors of expectations ________.

16) According to rational expectations, ________.

2) Monetary economists and financial economists developed ________ theories on expectations

7) Financial markets quickly eliminate unexploited profit opportunities through changes in

15) The efficient markets hypothesis indicates that investors ________.

16) The efficient markets hypothesis suggests that investors ________.

7.6 Web Appendix: Evidence on the Efficient Market Hypothesis

10) Evidence in support of the efficient markets hypothesis includes ________.

11) Evidence against market efficiency includes ________.

13) The January effect refers to the fact that ________.

15) A phenomenon closely related to market overreaction is ________.

17) Mean reversion refers to the fact that ________.

See (in this volume)

WILLIAM II., German Emperor.

See (in this volume)

WILLIAM II., German Emperor.

See (in this volume)

WILLIAM II., German Emperor.

See (in this volume)

WILLIAM II., German Emperor.

See (in this volume)

WILLIAM II., German Emperor.

See (in this volume)

See (in this volume)

See (in this volume)

WITU. The State of.

See (in this volume)

See (in this volume)

WOLCOTT, Senator Edward O.:

See (in this volume)

Four States have given to women unlimited political freedom,

WOMAN'S CENTURY, The.

See (in this volume)

WOOD, Leonard, Colonel

See (in this volume)

WOOD, Leonard, Colonel

See (in this volume)

WOOD, Leonard, Colonel.

See (in this volume)

WORKINGMEN'S INSURANCE, Compulsory, in Germany.

See (in this volume)

WORKMEN'S COMPENSATION ACT, English.

See (in this volume)

WORLD POWERS, The four great.

See (in this volume)

X RAYS. The discovery of.

See (in this volume)

YAMAGATA, Marquis: Ministry.