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- Which of the following statements is most correct? Why?* a. If a market is weak-form efficient, this means that prices rapidly reflect all available public information. b. If a market is weak-form efficient, this means that you can expect to beat the market by using technical analysis that relies on the charting of past prices. c. If a market is strong-form efficient, this means that all stocks should have the same expected return. d. All of the statements above are correct. c. None of the statements above is correct.Which of the following empirical observations appear to contradict weak form market efficiency? a. The average rate of return of stocks is significantly greater than zero b. The month-to-month time series autocorrelation of stock returns is not significantly different from zero c. A strategy of buying recent high-return stocks (winners) and shorting recent low-return stocks (losers) provides significant positive alpha d. Low dividend stocks provide higher-than-average capital gains e. None of the aboveWhich of the following statements is INCORRECT about the Random Walk Hypothesis? A) It assumes successive returns are statistically independent. B) It assumes there is no correlation between the returns in one period and the next. C) It assumes the distribution of returns in all periods is identical. D) It assumes historical share prices can be used to predict future price movements.
- A “random walk” occurs when:a. Stock price changes are random but predictable.b. Stock prices respond slowly to both new and old information.c. Future price changes are uncorrelated with past price changes.d. Past information is useful in predicting future prices.Many financial economists believe that the random walk model is a gooddescription of the logarithm of stock prices. It implies that the percentagechanges in stock prices are unforecastable. A financial analyst claims to havea new model that makes better predictions than the random walk model.Explain how you would examine the analyst’s claim that his model is superior?If markets are efficient, what should be the correlation coefficient between stock returns for two nonoverlapping time periods?
- What is the solution for this questionsb) "If a stock had high returns so far, it will have low returns in the future". Discuss whether this statement is true or false, based on the knowledge of the different theories and models out there.II. Determine what form of the theory of efficient market is being described in each item. Write W for weak form, SE for semi-strong form, ST for strong form. _1. Past data will not give investors an advantage. 2. The stock prices show historical information only. _3. the stock prices reflect all its past market trading data. _4. The stock prices already reflect all publicly available data. 5. The stock prices already reflect all past market trading data. _6. The technical analysis will not give new information in this form. 7. The fundamental analysis will not give new information in this form. 8. Both the fundamental and technical analysis will not give new information. _9. The stock pricess show historical information which may or may not include inside information. _10. The stodk prices already reflect all publicly available date such as any product, financial statement, etc.
- Consider an event study of the following stock. Realised return Market return t = 0 (event day) 0.1 0.1 t =1 0.06 0.04 t = 2 0.03 0.02 t = 3 0.015 0.01 Suppose that the estimated market model is . What is the CAR (cumulative abnormal returns) for t = 3?5. Evidence that stocks that outperform the market this month also outperform the market next month would tend to disconfirm which form of the efficient capital markets hypothesis? a. the weak form b. the semi-strong form c. the strong form d. the weak and semi-strong forms e. all formsEconomics According to Technical Analysis, a stock velocity statistics most closely resembles which of the following modern concepts? O Value at Risk O beta O Expected Shortfall O sigma Which of the following technical analysis technique is most likely to utilize spectral analysis from physics? O Relative Strength theory O Value theory O Elliot wave theory O Momentum theory Who, of the following people, is most often referred to as the "grandfather of technical analysis"? O Andrew Lo O Burton Malkiel O Charles Dow Edward and Magee