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1 | |
The efficient markets hypothesis |
| | A) | is a broader theory that supplements the random walk hypothesis. |
| | B) | is supported by most studies, at least to a certain degree. |
| | C) | is challenged by market anomalies like the "January effect." |
| | D) | b and c only |
| | E) | a, b, and c |
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2 | |
The listing of stock on an exchange: |
| | A) | is automatic for most stock provided the company issuing the stock pays an annual membership fee. |
| | B) | is not dependent on the earning power of the company whose stock is a candidate for listing. |
| | C) | is not dependent on the number of common shares held by the public. |
| | D) | is a significant influence on the stock's liquidity, enhancing the liquidity of exchange-traded stock relative to that of unlisted stock. |
| | E) | none of the above is correct. |
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3 | |
The frequent research finding that daily returns on stock tend to be lowest on Mondays is called the: |
| | A) | the daily price skewness effect. |
| | B) | the weekend effect. |
| | C) | the signaling effect. |
| | D) | the strong-form effect. |
| | E) | none of the above. |
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4 | |
The principal investor group in the United States holding shares of corporate stock is: |
| | A) | pension funds. |
| | B) | commercial banks. |
| | C) | insurance companies. |
| | D) | mutual funds. |
| | E) | households. |
| | F) | none of the above. |
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5 | |
A combination trade in which an investor purchases a put and a call on the same stock, both carrying the same exercise price and maturing on the same date, is known as a: |
| | A) | subindex option. |
| | B) | package option. |
| | C) | multiple-contract trade. |
| | D) | straddle. |
| | E) | none of the above |
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6 | |
Individual investors can earn returns comparable to those of professional traders by following a(n): |
| | A) | active trading strategy purchasing securities in high growth industries. |
| | B) | passive trading strategy purchasing securities listed on the NYSE. |
| | C) | buy and hold strategy purchasing securities randomly from the market portfolio. |
| | D) | hedging strategy purchasing derivatives to counter adverse price movements. |
| | E) | There is no strategy that will work. Professional traders always earn greater returns than the individual investor. |
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7 | |
Suppose the key officer of a company suddenly begins selling his or her stock and that fact is subsequently reported in The Wall Street Journal. This is an example of: |
| | A) | the weekend effect. |
| | B) | the small-firm effect. |
| | C) | weak form efficiency. |
| | D) | the corporate sales hypothesis. |
| | E) | none of the above. |
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8 | |
Investment firms, organized as private ________ have grown as an important investment vehicle for wealthy individuals and institutional stock investors and have contributed significantly to the success of the private equity market. |
| | A) | vulture funds |
| | B) | limited partnerships |
| | C) | special-purpose corporations |
| | D) | closed-load mutual funds |
| | E) | none of the above |
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9 | |
Investors in preferred stock generally earn a _____ return and assume _____ risk than do investors in bonds. |
| | A) | lower, less |
| | B) | lower, more |
| | C) | higher, less |
| | D) | higher, more |
| | E) | equal, equal |
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10 | |
Dollar-denominated claims on shares of designated stock issued by foreign companies and held in safekeeping by selected U.S. financial institutions are known as: |
| | A) | American depository receipts. |
| | B) | Euronotes. |
| | C) | foreign equity claims. |
| | D) | stock trust certificates. |
| | E) | none of the above. |
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11 | |
A contract granting an investor the right to sell a specified number of equity shares at a set price on or before the expiration date is known as a: |
| | A) | call. |
| | B) | straddle. |
| | C) | put. |
| | D) | sub-index contract. |
| | E) | none of the above. |
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12 | |
Stocks acquired the last month of the year and sold the following month frequently post excess returns. This is known as the: |
| | A) | year-end effect. |
| | B) | signaling effect. |
| | C) | weak form efficiency. |
| | D) | cumulative price-change effect. |
| | E) | none of the above. |
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13 | |
The idea that some information that has a significant bearing on the true market value of securities is not available to everyone, but only to certain security traders is known as: |
| | A) | strong-form efficiency. |
| | B) | signaling. |
| | C) | asymmetrical information. |
| | D) | weak-form efficiency. |
| | E) | none of the above. |
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14 | |
From 1970 to 2000, the Dow Jones Industrial Average (the Dow 30) has grown approximately _________. |
| | A) | 5 times |
| | B) | 9 times |
| | C) | 14 times |
| | D) | 20 times |
| | E) | none of the above |
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15 | |
The largest institutional holder of corporate stock in the United States is: |
| | A) | commercial banks. |
| | B) | insurance companies. |
| | C) | pension funds. |
| | D) | mutual funds. |
| | E) | none of the above. |
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16 | |
The view of the market that says stock prices reflect all publicly available information known as the _____ form of the efficient markets hypothesis. |
| | A) | weak |
| | B) | semi-strong |
| | C) | strong |
| | D) | random walk |
| | E) | fundamental |
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17 | |
Participants on an exchange who trade in one or a limited number of shares of stock are called: |
| | A) | floor brokers. |
| | B) | specialists. |
| | C) | odd-lot traders. |
| | D) | floor traders. |
| | E) | none of the above. |
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18 | |
The largest and fastest growing market for the shares of foreign companies traded inside the United States is the market for: |
| | A) | TOPIX |
| | B) | OTC |
| | C) | ADRs |
| | D) | Documented Shares |
| | E) | none of the above |
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19 | |
One major factor causing the global markets for corporate stock to grow in recent years has been: |
| | A) | Privatization of many state-owned businesses. |
| | B) | Rising and record high interest rates, particularly in the United States |
| | C) | A decline in corporate bond issues |
| | D) | A rise in bank borrowings |
| | E) | None of the above |
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20 | |
A stockholder concerned about the possibility of a price decline could _______ to hedge while still benefiting if the price rises. |
| | A) | buy a put option |
| | B) | sell a put option |
| | C) | buy a call option |
| | D) | buy a mutual fund |
| | E) | sell ADRs |
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