Most Studies of Stock Market Efficiency Suggest That the Stock

question 59

Multiple Choice

Most studies of stock market efficiency suggest that the stock market is highly efficient in the weak form and reasonably efficient in the semistrong form.Based on these findings,which of the following statements is correct?

• A)Information disclosed in companies' most recent annual reports can be used to consistently beat the market.
• B)The stock price for a company has been increasing for the past 6 months. Based on this information, it must be true that the stock price will also increase during the current month.
• C)Information you read in a daily newspaper such as National Post today cannot be used to select stocks that will consistently beat the market.
• D)Managers who have inside information that is not available to the public cannot consistently earn abnormal returns, i.e., returns that are higher than those predicted by the SML.

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Definitions:

Honoured

In financial terms, referred to a cheque or payment that has been accepted and processed by the bank.

Adjusting Entries

Journal entries made in accounting to update the records for accruals and deferrals that have not been recorded through regular financial transactions.

Calendar-year

A one-year period that starts on January 1 and ends on December 31, used in financial reporting and tax calculations.

Promissory Note

A financial document representing a promise to pay a specified sum of money to the holder at a future date or upon demand.