Suppose that, after conducting an analysis of past stock prices, you come up with the following observations. Which would appear to contradict the weak form of the efficient market hypothesis? The average rate of return is significantly greater than zero. The correlation between the return during a given week and the return during the following week is zero. One could have made superior returns by buying stock after a 10% rise in price and selling after a 10% fall. One could have made higher-than-average capital gains by holding stocks with low dividend yields.

You have been provided with the following information about the expected returns to Stock A and Stock B for various possible future economic conditions. State of Economy Boom Level Slump Probability of State of Economy 0.25 0.60 0.15 Return for Stock A 0.25 0.47 0.10 Return for Stock B 0.52 0.12 -0.10

answer each part CORRECTLY please!

Suppose that during the coming year, the risk free rate, rRF, is expected to remain the same, while the market risk premium (rM − rRF), is expected to fall. Given this forecast, which of the following statements is CORRECT? a. The required return on all stocks will remain unchanged. b. The required return will fall for all stocks, but it will fall more for stocks with higher betas. c. The required return for all stocks will fall by the same amount. d. The required return will fall for all stocks, but it will fall less for stocks with higher betas. e. The required return will increase for stocks with a beta less than 1.0 and will decrease for stocks with a beta greater than 1.0.

An analyst has estimated how a particular stock’s return will vary depending on what will happen to the economy.   What is the standard deviation? STATE OF THEECONOMY PROBABILITY OFSTATE OCCURRING STOCK'S EXPECTEDRATE IF THISSTATE OCCURS Recession Below Average Average Above Average Boom .10 .20 .40 .20 .10 (.60) (.10) .15 .40 .90

Assume that the risk-free rate remains constant, but the market risk premium declines. Which of the following is most likely to occur?   a. The required return on a stock with beta = 1.0 will not change.     b. The required return on a stock with beta > 1.0 will increase.     c. The return on "the market" will increase.     d. The return on "the market" will remain constant.     e. The required return on a stock with a positive beta < 1.0 will decline.

A stock's returns have the following distribution: Sharpe ratio: 0.1 0.2 0.3 0.3 0.1 1.0 Assume the risk-free rate is 3%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places. Stock's expected return: Standard deviation: Coefficient of variation: % Demand for the Company's Products Weak Below average Average Above average Strong % Probability of this Demand Occurring Rate of Return if this Demand Occurs (40%) (14) 12 25 55

Let Ps be the current market price of a share of common stock of Company X. Let P; be the "fundamental" value of a share of common stock of Company X. Let r be the long-run average annual compounded rate of return on common stocks, ånd b be the long-run annual compounded rate of return on corporate bonds. Finally, let ɛ be a random error term. Which of the following equations best characterizes the Efficient Markets Hypothesis? Select one: O a. Ps = Pf + r+ ɛ O b. Ps = Pf + ɛ- b O c. Ps = (Pf + ɛ) x (r – b) O d. Ps = Pf + ɛ

Which of the following is (are) correct regarding average returns? A The geometric mean is a better measure of an investor's effective return over several periods than the arithmetic mean. B The arithmetic mean is the average return for a series of returns and will always be less than or equal to the geometric mean. C Both a and b. D Neither a nor b.

Stock HB has a beta of 1.5 and Stock LB has a beta of 0.5. The market is in equilibrium, with required returns equaling expected returns. Which of the following statements is CORRECT?   a. If expected inflation remains constant but the market risk premium (rM – rRF) declines, the required return of Stock LB will decline but the required return of Stock HB will increase.     b. If both expected inflation and the market risk premium (rM – rRF) increase, the required returns of both stocks will increase by the same amount.     c. Since the market is in equilibrium, the required returns of the two stocks should be the same.     d. If expected inflation remains constant but the market risk premium (rM – rRF) declines, the required return of Stock HB will decline but the required return of Stock LB will increase.     e. If both expected inflation and the market risk premium (rM – rRF) increase, the required return on Stock HB will increase by…