Assume That Markets Are Semistrong Efficient, but Not Strong-From Efficient

question 27

Multiple Choice

Assume that markets are semistrong efficient, but not strong-from efficient. Which of the following statements is most correct?

• A) Each common stock has an expected return equal to that of the overall market.
• B) Bonds and stocks have the same expected return.
• C) Investors can expect to earn returns above those predicted by the SML if they have access to public information.
• D) Investors may be able to earn returns above those predicted by the SML if they have access to information which has not been publicly revealed.
• E) Answers b and c are correct.

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Definitions:

Confidence Interval

A set of values based on sample statistics, expected to include an unknown population parameter.

Sample Proportion

The fraction of the sample observations that belong to a particular category, often used as an estimator of the population proportion.

Hazardous Waste Site

Locations where waste materials harmful to humans or the environment are stored, treated, or disposed of.

Extrasensory Perception

A claimed ability to gain information through means other than the known human senses, including telepathy and clairvoyance.