Which One of the Following Best Describes the Current Understanding

question 49

Multiple Choice

Which one of the following best describes the current understanding of market efficiency?

• A) The market tends to overreact to new information in a manner which can be used to earn abnormal returns.
• B) Markets under-react to unanticipated events in a manner which can be used to earn excess returns.
• C) The market appears to be highly inefficient.
• D) Short-term market movements are difficult, if not impossible, to predict accurately.
• E) Markets tend to react slowly to unanticipated announcements.

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Definitions:

T Scores

Standardized scores on psychological and educational tests that have a mean of 50 and a standard deviation of 10, used to compare individual performance against a normative sample.

Sten Scores

Derived from the name “standard 10,” a standard score that is commonly used on personality inventories and questionnaires. Stens have a mean of 5.5 and a standard deviation of 2.

Standard Error of Measurement (SEM)

The standard error of measurement (SEM) is an estimate of the variation in scores due to measurement error, indicating how repeated measures of a person on the same instrument might differ.

T Score

A type of standardized score that has been adjusted to fit a normal distribution, typically with a mean of 50 and a standard deviation of 10.