A) Choosing stocks based on research and analysis you do yourself
B) Relying on advice from Wall Street analysts
C) Buying shares of an actively managed mutual fund
D) Buying shares of an index fund that purchases all stocks in a particular stock index
F) B) and D)
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A) raise the present value and the price of the corporation's stock.
B) raise the present value and reduce the price of the corporation's stock.
C) reduce the present value and the price of the corporation's stock.
D) reduce the present value and raise the price of the corporation's stock.
F) C) and D)
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A) has a better chance of outperforming the market if stock prices follow a random walk than if they do not follow a random walk.
B) almost always chooses to hold index funds in his or her portfolio rather than actively-managed funds.
C) is spending his or her time wisely if the efficient markets hypothesis is correct.
D) is interested in the likely ability of a corporation to pay dividends in the future.
F) A) and B)
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A) the demand for bank stocks rise which would raise the prices of bank stocks.
B) the demand for bank stocks rise which would reduce the prices of bank stocks.
C) the demand for bank stocks fall which would raise the prices of bank stocks.
D) the demand for bank stocks fall which would reduce the prices of bank stocks.
F) All of the above
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A) holds only stocks and bonds that are indexed to inflation.
B) holds all the stocks in a given stock index.
C) guarantees a return that follows the index of leading economic indicators.
D) typically has a lower return than a managed fund.
F) All of the above
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A) have no effect on its stock price.
B) raise the price of the stock.
C) lower the price of the stock.
D) change the price of the stock in a random direction.
F) C) and D)
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A) stock prices follow a random walk.
B) the stock market is informationally efficient.
C) it is better to own stock in 20 companies than it is to own stock in 2 companies.
D) All of the above are correct.
F) A) and C)
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A) doing research such as thoroughly reading and analyzing companies' annual reports
B) choosing mutual funds that are managed by individuals with good reputations
C) viewing individual stock prices as unpredictable
D) relying upon the advice of Wall Street analysts
F) A) and C)
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A) of high unemployment rates.
B) high inflation rates.
C) that has become known as the "Great Moderation."
D) that has become known as the "Great Recession."
F) B) and C)
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A) undervalued,and evidence later showed that this was clearly correct.
B) undervalued,but whether it was remains debatable.
C) overvalued,and evidence later showed that this was clearly correct.
D) overvalued,but whether it was remains debatable.
F) None of the above
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A) Fundamental analysis would now show the corporation is overvalued.The fact that the price was unchanged is consistent with the efficient markets hypothesis.
B) Fundamental analysis would now show the corporation is overvalued.The fact that the price was unchanged is not consistent with the efficient markets hypothesis.
C) Fundamental analysis would now show the corporation is undervalued.The fact that the price was unchanged is consistent with the efficient markets hypothesis.
D) Fundamental analysis would now show the corporation is undervalued.The fact that the price was unchanged is not consistent with the efficient markets hypothesis.
F) A) and B)
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A) raise the price and raise the present value of the corporation's stock.
B) raise the price and lower the present value of the corporation's stock.
C) lower the price and raise the present value of the corporation's stock.
D) lower the price and lower the present value of the corporation's stock.
F) C) and D)
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A) There is a greater reduction in risk by increasing the number of stocks in a portfolio from 1 to 10,than by increasing it from 100 to 120 stocks.
B) The historical rate of return on stocks has been about 5 percentage points higher than the historical rate of return on bonds.
C) Stock in an industry that is very sensitive to economic conditions is likely to have a higher average return than stock in an industry that is not so sensitive to economic conditions.
D) If you had information about a corporation that no one else had,you could earn a very high rate of return.This contradicts the efficient market hypothesis.
F) A) and B)
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A) about one-half of all managers of active mutual funds consistently outperform index funds.
B) outperforming the market on a consistent basis is extremely difficult to do.
C) there is little truth to the notion that there is a trade-off between risk and return.
D) there is little truth to the efficient markets hypothesis.
F) B) and D)
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A) impossible.Many studies find that beating the market is,at best,extremely difficult.
B) impossible.Many studies find that beating the market is relatively easy.
C) relatively easy.Many studies find that beating the market is,at best,extremely difficult.
D) relatively easy.Many studies find that beating the market is relatively easy.
F) C) and D)
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A) long periods of declining prices are followed by long periods of rising prices.
B) the greater the number of consecutive days of price declines,the greater the probability prices will increase the following day.
C) stock prices are unrelated to random events that shock the economy.
D) stock prices are just as likely to rise as to fall at any given time.
F) B) and C)
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A) Managed funds typically have a higher return than indexed funds.This tends to refute the efficient market hypothesis.
B) Managed funds typically have a higher return than indexed funds.This tends to support the efficient market hypothesis.
C) Index funds typically have a higher rate of return than managed funds.This tends to refute the efficient market hypothesis.
D) Index funds typically have a higher rate of return than managed funds.This tends to support the efficient market hypothesis.
F) None of the above
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A) dividends.
B) the expected final sale price.
C) the ability of the corporation to earn profits.
D) All of the above are correct.
F) C) and D)
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A) only individual investors can make money in the stock market.
B) it should be easy to find stocks whose price differs from their fundamental value.
C) stock prices follow a random walk.
D) All of the above are correct.
F) A) and D)
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A) boom at that time reflected "irrational exuberance."
B) decline at that time reflected "irrational funk."
C) boom at that time reflected "rational exuberance."
D) decline at that time reflected "rational funk."
F) All of the above
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