Tests of the Efficient Market Hypothesis (EMH) Are Sometimes Based

question 59

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) adding the expected rate of return to the actual return, where the expected return is based on the stock's projected dividend yields.

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Definitions:

Personality Traits

Enduring characteristics that describe an individual's behavior consistently across situations, such as extraversion or neuroticism.

Identical Twins

Twins who develop from a single fertilized egg that splits and forms two embryos, sharing 100% of their genes.

Environmental Influences

The impacts of the surrounding environment, including social, physical, and cultural factors, on an individual's behavior and development.

Fraternal Twins

Also known as dizygotic twins, are siblings that develop from two separate eggs fertilized by two different sperm cells, but are born at the same time.