Market Efficiency And Behavioral Finance

Front 1

What is a market in which security prices adjust rapidly to reflect any new information, i.e security prices reflect all past and present information

Back 1

Efficient market

Front 2

What form of EMH is it impossible to consistently attain superior profits by analyzing past returns?

Back 2

Weak form

Front 3

What form of EMH is it impossible to consistently attain superior profits by analyzing public information

Back 3

Semi-Strong

Front 4

In what form of EMH will prices adjust immediately upon the release of any public announcements?

Back 4

Semi-Strong

Front 5

What form of the EMH says there are only lucky and unlucky investors and no one (not even company insiders) can consistently attain superior profits?

Back 5

Strong form EMH

Front 6

Under strong form EMH, what is the best strategy, passive or active?

Back 6

Passive

Front 7

What form of the EMH is supported by this? Stock prices followed a random walk model (past stock prices have no bearing on future prices)

Back 7

Weak Form

Front 8

What form of the EMH is supported by the following? No distinct pattern in the points, with the concentration of points around the origin. No bias toward any quadrant

Back 8

Weak form

Front 9

What form of the EMH is supported by the following? Autocorrelation coefficients were close to 0.

Back 9

Weak form

Front 10

Does the variance of multi-period change being approximately proportional to the number of periods support or not support the weak form EMH

Back 10

Support

Front 11

What form of the EMH is supported by the following statement? 3 months prior to a takeover announcement, the stock price gradually increased. At the time of announcement, the abnormal returns dropped to zero.

Back 11

Semi-strong

Front 12

What form of EMH is supported by the following statement? Top performing fund managers in one year only have a 50% chance to beat their reference index the following year

Back 12

Strong Form

Front 13

What form of the EMH is supported by the following? The performance of actively managed mutual funds from 1971-2013 only beat the Wilshire 500 index 40% of the time

Back 13

Strong form EMH

Front 14

This is what calendar/time anomaly that is evidence against EMH: Returns have been higher in January and lower in December than other months.

Back 14

January Effect

Front 15

This is what calendar/time anomaly that is evidence against the EMH? Returns have been lower on Monday and higher on Friday than on other days of the week

Back 15

Monday Effect

Front 16

This is what calendar/time anomaly that is evidence against the EMH? Returns are more volatile close to the opening and closing hours for the market. Also, the trading volumes are higher during those times.

Back 16

Time of day effect

Front 17

This is what underreaction/overreaction anomaly that is evidence against the EMH? Overreaction to new issues pushes up stock prices initially.

Back 17

New issue/IPO puzzle

Front 18

Investors underreacting to the earnings announcement is what underreaction/overreaction anomaly?

Back 18

Earnings announcement puzzle

Front 19

There is a positive serial correlation in stock prices as investors underreact to new information

Back 19

Momentum Effect

Front 20

There is a negative serial correlation in stock prices as investors overreact to new information

Back 20

Reversal Effect

Front 21

Two stocks with claims to a common cash flow should be exposed to identical risks but perform differently

Back 21

Siamese Twins

Front 22

What market anomaly says this: For a given political administration, its first and last year yield higher returns than the year between

Back 22

Political cycle Effect

Front 23

What market anomaly says this?Returns are higher before and after the company announces the stock split?

Back 23

Stock split effect

Front 24

What market anomaly says that lesser known firms yield abnormally high returns?

Back 24

Neglected firm effect

Front 25

What market anomaly says that historical data shows in the year after the Super Bowl, the stock market is more likely to do better if an NFC team won and worse if an AFC team won?

Back 25

Super Bowl Effect

Front 26

What market anomaly says that small cap companies have outperformed large cap companies on a risk adjusted basis?

Back 26

Size Effect

Front 27

What market anomaly says that value stocks have consistently outperformed growth stocks?

Back 27

Value Effect

Front 28

True or false? Bubbles also violate market efficiency

Back 28

True

Front 29

What happens when the market value of the asset significantly deviates from its intrinsic value?

Back 29

Bubbles

Front 30

True or False? Under the CAPM assumptions, the market portfolio is an efficient portfolio?

Back 30

True

Front 31

Under the CAPM assumptions, the market portfolio is an efficient portfolio, and all investors should hold what portfolio?

Back 31

The market portfolio

Front 32

Is the assumption of rational expectations more or less rigid than that of homogenous expectations!

Back 32

Less rigid

Front 33

Rational expectations means that investors what?

Back 33

Interpret and use their information correctly

Front 34

The market portfolio can be inefficient (and thus it’s possible to beat the market) only if a significant amount of investors...

Back 34

Don’t have rational expectations

Care about aspects of their portfolio other than expected return and volatility (and so they are willing to hold portfolios that are mean variance inefficient)

Front 35

For a takeover offer, after the initial jump in the stock price at the time of the announcement, target stocks (do or do not) appear to generate abnormal subsequent returns on average?

Back 35

Do not appear to generate abnormal subsequent returns on average

Front 36

Stocks that are acquired tend to appreciate or depreciate?

Back 36

Appreciate

Front 37

Stocks that are acquired tend to have negative or positive alphas?

Back 37

Positive

Front 38

Stocks that are not acquired tend to appreciate or depreciate?

Back 38

Depreciate

Front 39

Stocks that are not acquired tend to have positive or negative alphas?

Back 39

Negative alphas

Front 40

When a stock recommendation is given at the same time that news about the stock is released, does the initial stock price reaction under react, over react, or appear correct?

Back 40

Appears correct

Front 41

When a stock recommendation is given without news, does the stock price under react, over react, or appear correct?

Back 41

Overreact

Front 42

The what actually destroys value (think the performance of fund managers)

Back 42

Median mutual fund

Front 43

True or False: people who grew up during a time of high stock returns are less likely to invest in stocks?

Back 43

False (more likely)