If Statistical Tests of Stock Returns Over Time Support the Efficient

question 160

Multiple Choice

If statistical tests of stock returns over time support the efficient market hypothesis, then the resulting correlations should be

• A) positive.
• B) negative.
• C) zero.
• D) lagged.
• E) skewed.

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Definitions:

Voting Shares

Shares of stock that grant the holder the right to vote on corporate matters.

Cost Method

Accounting for investments where the investor does not exercise significant influence, recording the investment at initial cost and recognizing income only when dividends are received.

Unrealized Intercompany Gain

Profits recorded on the books resulting from transactions among subsidiaries that are not realized until sold to an external party.

Income Tax Expense

The total amount of income tax a company or individual owes to the tax authorities for the current fiscal year.