Tests of the Efficient Market Hypothesis (EMH)are Sometimes Based on Examining

question 70

Multiple Choice

Tests of the efficient market hypothesis (EMH) are sometimes based on examining its abnormal rate of return.The abnormal rate of return is calculated by:

• A) Subtracting the expected rate of return from the actual return, where the expected return is based on the stock's beta and the CAPM.
• B) Subtracting the actual rate of return from the expected return, where the expected return is based on the stock's beta and the CAPM .
• C) Subtracting the expected rate of return from the actual return, where the expected return is based on the stock's projected dividend yields .
• D) Subtracting the expected rate of return from the actual return, where the expected return is based on the stock's projected dividend yields.
• E) None of the above

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Definitions:

Negotiate Norms

involves discussing and adjusting the rules or standards of behavior expected in a social group or culture.

Impression Management

The process by which individuals attempt to control the perceptions others have of them.

Symbolic Interactionism

A sociological perspective that analyzes society by studying the symbols and communication methods used by individuals to interpret and respond to their social environment.

Rational Choice Theory

Rational choice theory focuses on the way interacting people weigh the benefits and costs of interaction. According to rational choice theory, interacting people always try to maximize benefits and minimize costs.