Which of the Following Is a Possible Exception to the Efficient-Market

question 48

Multiple Choice

Which of the following is a possible exception to the efficient-market theory?

• A)Underwriters charge investors more for IPO shares than they pay the issuing firms.
• B)IPO spreads are lower on larger issues.
• C)The issuance of equity is interpreted as an unfavorable signal by investors.
• D)The long-run returns of IPOs tend to underperform the market.

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Definitions:

Sample Means

The average values calculated from samples, used as estimates of the population mean.

Variance

A measure of the dispersion or spread of a set of values, calculated as the average of the squared deviations from the mean.

Binomial Random Variable

A type of random variable that follows a binomial distribution, signifying the number of successes in a series of independent trials.

Normal Approximations

The use of the normal distribution to approximate the distribution of sample statistics for large sample sizes, even if the data itself is not normally distributed.