Chapｔer11TheEfficientMaｒketHypoｔhesiｓ

MultipleChｏiｃeQuesｔions?

１.

Ifyouｂelieveiｎthe__＿__＿__ｆｏｒmofthｅＥＭH,ｙｏuｂｅlievｅthatsｔockpricesreｆleｃtａllrmaｔionｉncludinｇｈistoriｃalｓtｏckpricｅｓandcｕrrentpuｂliciｎｆormatｉonabouttheｆirm,butnotinformatioｎtｈａｔisaｖailableoｎlytｏinｓiders．

A.

Ｓemistｒｏｎg

WheｎMａｕriceKｅndallexaminedthepatｔeｒnsofstockreturnｓin1９53ｈecoｎcｌudｅdｔhａtｔheｓtｏｃkmarkｅtwaｓ________＿＿.Now，tｈｅseｒandｏmｐriｃemovｅｍeｎｔsareｂｅｌievedtｏbe＿＿＿＿____＿.

?A.

inefficienｔ;theeffｅctofawell-functioninｇｍarket

Thesｔocｋmａrketfollowｓａ_____＿____.

?Ｂ.

Submartｉnｇaｌe

Ahyｂridｓtｒatｅgyisｏnｅwhｅreｔheinｖeｓtｏｒ

?D．

mａｉntainsapasｓivecoreａｎdaｕgmenｔsthepoｓiｔionwｉｔhanactiｖelyｍanagｅdpoｒtｆolio.

Thedｉfferenｃebｅtｗeenarandｏｍwalｋａndasubmａrtiｎgaleｉsｔｈeeｘpｅctedpricｅchangeiｎａraｎdｏmwalkis_____＿ａndtheexpectedｐriceｃhaｎgｅｆｏrａsubmａｒtｉnｇａｌeiｓ_＿__＿＿.

?D.

ｚｅｒｏ;positive6.

Ｔhedｉfferencebeｔｗeenａｒanｄｏmwａlkanｄasubmartingaleｉstheeｘpecｔｅdpricechａngeinａraｎdｏｍwalkｉｓ＿___＿_anｄｔhｅexpecｔedpricechangｅforａsuｂmarｔｉｎgaleis＿_____．

?D．

ｚero；poｓitive

7.

ＰropｏnｅntsｏftheＥMHtypicａｌlyadvocate

?B.

ｉｎvesｔｉｎginanｉｎdexfuｎｄ.?C.

aｐａssivｅinvestmentsｔrａtegy．?E.

BandC

ProponｅntｓoftｈｅＥMHtypｉｃallｙａdvocａte

?Ｃ.

apaｓsiveinvestｍeｎｔｓｔrategy.

Ifｙｏuｂelieｖeinthe_____＿_forｍofthｅEMH,youbeｌiｅveｔhａtstｏckpricesｒeｆlecｔaｌlinｆｏｒmaｔionthatcaｎbederiｖedｂyｅxamiｎingｍａrkｅｔｔrａdｉngdaｔasuｃｈasthehｉｓtoryｏfｐastsｔockprices，ｔradｉｎgｖolumeｏrｓhortinterest．

Ｃ.

Weak

Ifyｏubｅlｉeveinthe__＿______ｆorｍoftｈeEＭH,yｏubelieｖetｈaｔsｔoｃkｐriｃesrefleｃtａllaｖａilａｂlｅiｎformatioｎ,iｎcｌudiｎgiｎｆｏrｍａtioｎthatisavａiｌableonｌytoinsiｄeｒｓ.

B.

sｔroｎg

11.

Ｉfｙｏubelｉｅvｅintherｅversaｌeｆｆect,yｏushｏuld

?C.

ｂuysｔocksthｉsｐeｒiodtｈatperfoｒmｅdｐoorｌｙlastperiod.12.

_＿___＿＿＿_＿fｏcｕsmoｒeonpａstpricemoｖｅｍentsｏfafirm'sｓtockｔｈanonthｅundeｒlｙiｎｇdｅｔerminaｎｔsoｆfｕtuｒepｒofｉtabｉliｔy．

D．

Teｃhnicａlanａlysts

13．

_________abovewhiｃhitisdifficultfｏrtheｍaｒkettoｒise.

?Ｂ.

Ｒeｓistancelｅｖelisavaｌue１4．

_＿___＿___belｏwｗｈiｃhitiｓdｉｆficultfortheｍarｋeｔtoｆall.

C.

Suｐporｔlevｅｌisavaｌue

15.

_____＿_____thｅｒetｕrnonａsｔocｋbeｙonｄwｈaｔwoulｄbepｒediｃteｄfromｍａrketmoｖemeｎtsaｌone.

?A.

Aneｘcesseｃoｎomiｃrｅtｕrnis

C．

Anabnoｒmalreｔｕrnis

Ｅ.

AａndC1６．

Thedebateoverwhｅtｈermａｒｋetsａrｅｅffｉcｉeｎtwiｌlproｂablｙneverberｅsoｌveｄbecauｓeｏf＿__＿＿___．

?A.

tｈeluckyevenｔisｓue．

B．

thｅｍagｎitudeissue.

C.

ｔheseleｃｔｉoｎbiａsisｓuｅ.?D.

allofｔheaｂoｖe.1７．

Acommｏｎstｒaｔegyforpassivｅmａnagementis＿＿_＿__＿＿＿___.

?A．

ｃrｅatiｎgaｎinｄexｆuｎd?

18．

Arbｅl(1９85)fouｎdthａt

?A.

theJａｎuaryeffecｔwashigｈｅstfornｅgｌecｔedfｉｒms.19.

Ｒeｓeａrchershavefoundthatmoｓtoftheｓｍａｌｌｆirmeffecｔｏccｕrs

D.

ｉｎＪaｎuary.2０．

Ｂasu(１977,１98３)fｏuｎｄthatfirmｓwｉｔｈlｏｗＰ／Ｅrａtiｏｓ

A．

earnedｈiｇｈeraｖeragerｅｔurnsthanfiｒmswｉtｈhｉgｈP/Ｅratioｓ.

2１．

Ｊaffe(1974）ｆoｕndｔhａtstoｃkｐrｉces__＿______ａｆteｒｉnsideｒsｉntｅnsivelyｂoughｔｓhaｒes．

?Ｃ.

iｎcrｅasｅd

２2.

Baｎz(1981）ｆounｄthat,onaverage,therisk-adjusｔｅｄreｔurｎsofsmallｆｉrms

A.

ｗeｒehigheｒｔhａnｔherisk-adjusｔedretuｒnsoflａｒgefirmｓ.２3.

ProｐoｎentsoｆｔheEMＨｔｈinkｔｅcｈniｃalanａｌysts

?E．

aｒeｗａstingｔheｉrtime.24．

Ｓｔudiesofpositiｖeｅaｒｎingssurprisｅshaveshｏｗnthatｔhｅreis

Ａ．

aｐｏsitivｅａｂｎormalrｅturnoｎｔｈedaypositiveearｎiｎgssurpriseｓaｒｅannoｕｎｃｅd.?B．

apositiveｄriｆtiｎthesｔockpｒiceｏｎｔhedａysfollowingthｅearninｇssｕrｐriseannｏunceｍent．

Ｄ.

bｏｔhAanｄBaretruｅ.?

25.

Studieｓofnegativｅearniｎgｓｓｕrpriseｓhaveshownthatｔhｅｒeiｓ

?A.

aneｇａtiveabｎoｒmａｌreturnonｔhｅｄaynｅgativeeaｒｎinｇsｓｕrｐrｉsesareａnｎounｃed.?B.

ａpoｓitivｅdrifｔｉnthestｏcｋprｉceoｎtheｄａysfollowｉnｇtheearningｓsｕrprｉseanｎｏunｃement.

D．

bothAandBａｒｅｔrue．２6.

Studieｓofstocｋｐricereactionｓtoneｗsarecaｌleｄ

?Ｂ.

evｅｎtstuｄies.2７．

OnＮoveｍｂeｒ22,2023thesｔoｃkｐｒiceofWalｍarｔｗas＄39．50aｎdtheｒeｔaｉlerstoｃkinｄexｗａｓ60０.30．OnNovember2５,2023tｈｅsｔoｃkpｒiceofＷalｍartwａs＄40.25aｎdtheretaｉlｅｒstocｋiｎｄexwaｓ60５.2０.ConｓidｅrtheraｔiｏofWａlmartｔｏtｈeｒetaｉｌeriｎdeｘonＮovｅmｂer22ａndNovember2５.Walｍartis__＿____ｔhｅretailiｎduｓtryanｄtechnｉcalanaｌysｔswhofolｌowrelatiｖestrｅnｇthwouldadviｓｅ_______thestocｋ.

?A.

ouｔperforming，buying?28．

WoｒkbyAmｉｈｕdandMｅｎｄｅlson（１986，1９９1)

A.

arｇuesthａｔｉｎveｓtorswilldemanｄａratｅofreｔurnprｅmiumtoinvestiｎlessliｑuｉdｓtocks．?B.

maｙhｅlpexpｌaｉntheｓmallfｉｒmeffecｔ.?C.

mayｂｅrelatedtothｅｎegｌectedｆirmeffect.?E.

A,B,ａｎdC.２９.

ＦaｍaandFrenｃh（１9９2）foundthａｔthｅstoｃksoffirmｓwithｉｎthｅhｉghesｔdecｉｌeofmarket/bｏokraｔioshadavｅraｇｅｍoｎthlyretuｒnsof＿__＿__＿ｗhilｅｔhestｏcksoffirｍsｗithｉnthelowesｔdｅcileofｍarket/ｂookrａtｉoshadaｖｅｒaｇｅmontｈｌyｒetｕrｎｓof___＿_＿__．

Ｃ．

lessthaｎ1％，ｇreａterｔhan1%

30.

Amarketｄeclineｏf2３％ｏnadaｙwhenthｅreisnoｓigniｆicantmacroeconomｉｃevent____＿＿cｏnsiｓｔｅｎtwiｔhtheＥMHbｅcausｅ_＿_＿____.

D.

wouldｎotbe,itwasｎoｔacｌearresponsｅtomacroecoｎomｉcnewｓ.31.

Inａnefｆiｃiｅnｔｍａrkｅt,_＿_＿__＿___.

A.

sｅcurityｐrｉcesreactquicklytonewiｎｆormatｉon?Ｂ.

ｓecｕｒityprｉｃｅsarｅseｌdomfaraｂｏveorbｅloｗｔheirｊustifiedlevels?C．

sｅcuriｔyanalystswillnoｔenableinvestorstoreａｌizｅsuｐeriorrｅturnｓconsistｅｎtｌy?Ｅ.

A,B,ａndC32．

Tｈeweakfoｒmofthｅｅffiｃieｎtｍarkethｙpothｅsisassｅrtｓtｈat

B.

futurechanｇesiｎstockpricescannotｂepredicｔeｄｆroｍｐasｔｐｒｉces.

C.

teｃhnicｉａnscannotｅxpecttooutperｆormthｅmarｋeｔ．

E.

BandC

Asupportlevelisthepricerａngｅaｔwhichaｔechｎicalanalｙsｔwoｕldeｘpecttｈe

?C．

demａnｄforａsｔocｋtｏｉｎcｒeasesｕbstａｎtially．

Aｆindingtｈat____＿＿_＿_wｏｕlｄprｏｖideｅvｉｄenｃeagａiｎsｔtheseｍistronｇｆｏrmｏｆtheｅffｉcｉｅntｍarkettheory.

Ａ.

loｗＰ/Estｏcｋｓtendtohａveposiｔiveaｂｎormalｒｅtｕrns?C.

onｅｃanconsisteｎｔｌｙｏｕtpｅrformtheｍaｒｋeｔbｙadopｔingtｈｅcｏntraｒｉａｎapproａchexemplｉｆｉｅdbyｔherｅversａlspｈenomeｎon?E.

AandＣ35.

Tｈeweａｋfｏrmｏftheefficｉｅntmarkethypothesiscoｎtｒadｉcts

?Ｄ.

tｅchnｉcalanａｌysis，buｔissiｌｅntonthepｏｓsibilityofsuccessfｕlfundaｍentalａｎaｌysis．36.

Twobａsｉcassumptionｓｏftｅchnicaｌａnalysisarethａtsecuｒｉtｙｐriceｓａｄjust

?C.

ｇrａduallytormａtionaｎdmａrkｅｔｐrｉcesaredeterminedｂyｔheiｎｔｅｒacｔiｏnoｆｓupｐｌｙaｎdｄｅmanｄ．?

３7.

Cuｍｕｌativeaｂnoｒmａlreturnｓ(ＣAＲ)

A.

aｒeｕsedineventｓtuｄiｅs.

B．

arebettermｅasuｒesｏfsecuritｙreturnsｄuetofｉrｍ-specificｅvenｔsthanarｅａｂnｏrmalretuｒns(ＡR).?Ｄ.

AanｄB.?３8.

Studiｅsofmｕtualfundpｅrｆormａｎｃe

A．

ｉnｄｉcateｔｈａtoneshoulｄnotraｎdｏmlｙｓelectamutｕalfund.?B.

indicａｔethathiｓtorｉｃalpｅrfｏｒmanceisnotｎeceｓsarilyiｎdicativｅｏffｕtｕreperfｏrｍance.

Ｄ.

AaｎdＢ.

39.

Ｔhelikeｌｉhｏodｏfaninvestmｅntnｅwsleｔtｅｒ＇ssuｃcesｓfullｙpreｄicｔingthｅdirｅctionofthemａrkeｔforthreeconｓecｕtiｖeｙｅａrｓｂyｃｈanｃｅshouldbｅ

Ｃ.

bｅtweeｎ10％ａnd25%.

40.

Ｉnanｅfｆｉcieｎtmaｒkeｔthecorreｌatioｎcoｅｆficieｎｔbetｗｅenstockrｅtｕrnsfortwoｎon-ｏvｅｒlaｐｐｉｎgtimeperioｄsｓhouｌdｂe

?C.

zero.?41.

TheweatheｒreporｔsaｙｓthatadｅvaｓtatingandｕｎexpectedfreezeisexpｅctedtoｈitFloridａｔonigｈt,ｄuringtｈｅpeakｏfｔhecitrusｈａrvｅｓt.ＩnａｎefficｉenｔmａrketonewouldｅxpecttheprｉceofFloｒiｄaＯraｎge＇sstｏckto

A.

dｒopimmeｄiatｅly.４2．

MatthewsCｏrpoｒationhasaｂｅtaoｆ１.2.Thｅannuaｌiｚｅdmaｒkｅtreturnｙestｅrdaywas13%,anｄtheriｓk－frｅerateisｃurreｎtｌｙ5％.YouoｂservｅtｈａtMaｔtheｗｓhadanａｎnｕａliｚedrｅｔurnyesteｒｄaｙｏf17%.Asｓuｍingｔhatmarｋetsaｒeｅfficient,thｉssuｇgeststhaｔ

?Ｂ．

goodnewsaｂoutMatthewsｗaｓａｎnｏuncedyestｅrday.４３.

NｉchｏlasＭａnufacturiｎgjustaｎｎounｃedyｅｓteｒdａｙtｈaｔitｓ4thquaｒteｒearniｎgｓwｉllbe10%hｉghｅrtｈanlaｓtyeａｒ's4thqｕarter.ＹouｏbservethatNicholashadanａbnormａlreturnof－1.２％yｅsterday．Ｔhｉssuｇｇeststhａt

?C.

inveｓｔorsｅｘpecｔeｄtheearningsiｎcrｅaｓｅtobｅlargerthanwｈatwaｓacｔｕaｌｌyannouncｅｄ.44.

WhｅnＭauｒiceKeｎdallfｉrsteｘaminedｓtockpｒicｅpatterｎsin１9５3,hefoｕndthat

Ｂ.

therｅwｅreｎopreｄicｔａbｌeｐaｔternｓinstｏｃkprices.４5．

Ifstockpricesfｏllowarａndｏmｗalk

?D.

ｐｒiｃeｃhangesarｅrandom.46.

Tｈeｍaｉndiffeｒｅncebｅtwｅｅntheｔhrｅeformsofmarkeｔeffｉciencyisthat

D.

ｔhｅdefiniｔｉoｎoｆｉnfｏｒmａtiondｉｆｆers.４7.

Chａrｔistspracｔｉce

Ａ.

ｔｅｃhniｃａlanａlｙｓis.48．

Whｉｃhoｆthefolloｗiｎgａrｅusedbyfuｎdaｍｅntａlａnaｌyststｏdetｅrmineｐrｏperstｏckpricｅs??Ｉ)tｒendliｎｅs?IＩ)eaｒnings

ＩＩI）ｄividendpｒｏspeｃtｓ

IV)ｅｘpｅctatiｏnsoffｕtｕrｅintereｓtrates

V)resｉｓtanｃelｅvelｓ

C.

II,III,ａndIV?

4９．

Aｃcordｉｎgｔｏｐｒｏｐoneｎtsｏfthｅｅｆfｉciｅntｍarkeｔｈypｏthｅｓiｓ,ｔhｅｂestｓtｒategyｆｏｒasmaｌlｉｎveｓtｏrwithaｐｏrtfolｉowortｈ$４0,０0０ispｒoｂabｌｙto

E．

ｉnvestiｎmｕｔualfuｎds.５0.

Wｈｉchoｆthefoｌlｏwiｎgaｒｅinveｓtｍenｔsupｅrｓtarsｗhohaveｃonsiｓｔｅｎｔlyshoｗnｓuperiorｐerformance??I)WａrrenBｕｆfeｔ

ＩI)PhoeｂｅBuffeｔ?IＩＩ)PeteｒLynｃh?IV)MerｒillLｙnｃh

V)JiｍmyＢufｆeｔ

C.

IandＩＩＩ５１．

Gｏoｇleｈａsabetａof１.0．Tｈeannualｉzeｄmarkeｔretuｒnyesｔeｒdayｗａs11%,andtheｒisk-freeratｅｉscuｒrｅnｔly5%.YouobservｅthatGｏoglehａdａｎanｎualizedretuｒｎyｅｓteｒdａyof１4%.Assumingtｈａtmarkeｔｓarｅefficient,ｔhｉssugｇeｓtｓtｈat

?Ｂ．

goodnewｓaboｕtＧｏoglewasaｎnoｕncedｙesteｒｄay.52.

MusiｃDocｔoｒshasabｅtaof２.2５．Ｔheannualizｅdmarｋetreturnyesｔeｒdaywas1２%,ａndtｈeｒisｋ-ｆreeratｅisｃurｒentlｙ4%.YｏuobｓervethａｔＭusicDoｃtorｓhaｄａnaｎnｕａlizeｄｒetuｒnyesterdayof15%.Assuｍｉngthａtmarkｅtsaｒeefｆiｃiｅnｔ,thissuggeｓtｓthaｔ

?A．

badneｗsａｂoｕtMusicDoctorsｗaｓanｎoｕncedｙｅｓｔerday.

53.

QQAGhaｓaｂetaoｆ1.7.Ｔheannualizｅdｍarketｒeturnｙesterdayｗas13%，ａnｄｔherisk-frｅerａｔeｉscurrｅntｌy3%．YouｏｂserｖeｔhatQＱＡGhａｄａnannualizeｄreｔｕｒnyeｓterｄayof20%.Asｓumiｎgthatmarketsaｒeeffｉciｅnｔ，tｈisｓuggesｔｓtｈａｔ

?C.

nｏｓigｎificantneｗｓａboｕｔQQＡGwａsａnnｏuncedyｅsｔｅrdａｙ.５4．

QQAGjustaｎｎounｃedyeｓterdaytｈａｔits４ｔhquartｅrｅarｎingswilｌbe35%ｈｉｇherｔhanlastyeａr's4ｔhqｕarter.YouobsｅrｖｅthatQＱAGhａdanabnoｒmalreturｎｏｆ-1.7%yesterｄay.Ｔhissuｇgeｓtsｔhat

C.

ｉnｖesｔoｒsｅｘpｅｃtｅdtｈｅearningsincreasetobelaｒgｅrthanwhatｗasactuallyannoｕnced.?５5.

LJＰCoｒporationjustannｏｕnceｄyｅsterdａｙｔｈａｔiｔｗouｌdundｅｒtakeａnｉｎtｅrｎationａｌｊｏiｎｔventｕrｅ.YouobservetｈatLJPｈadａnabｎoｒmａlreturnoｆ3％yeｓtｅrｄａy．Tｈissugｇｅstｓthat

?D.

iｎvｅsｔorsviewｔｈeinｔeｒｎatioｎaljointveｎtureasgoodneｗs.

56.

MusｉｃDｏctorsｊustａｎnouｎｃeｄｙesｔeｒdaｙｔhａtｉts1ｓｔquａrterｓalｅsｗere35％ｈigherthａnｌaｓtyear'ｓ１ｓtquaｒtｅr.ＹoｕoｂservetｈatMusicDｏctoｒsｈadａnabnormaｌreturnｏｆ-2%yｅsterday.Thｉｓsugｇｅｓtsthat

?C.

iｎｖｅsｔorsexｐeｃtedthesaleｓiｎｃreasetobelargerthanwｈaｔwasacｔｕaｌｌyannounｃｅｄ.57.

ＴhｅFｏoｄanｄDrugAdminｉstration（FＤA)justannｏuncedyeｓteｒdaythaｔtｈeywｏuｌdappｒｏveanewcanceｒ－ｆigｈｔｉngdrugｆrｏmＫｉｎg.YoｕobseｒvetｈatKinghaｄａｎabｎoｒmalreｔｕrnof0%yesteｒday.Ｔhissｕggeststｈat

?D.

theapｐrｏvａlwaｓalreadyanticｉpatｅｄｂyｔhemarｋet?58．

Yｏurprｏfessｏrｆinｄsastocｋ-tｒaｄingｒulｅthａtgｅnerａtesexｃｅsｓrｉｓk-ａdjustedｒeturns．Insｔeadofｐublｉshingtheresｕlｔs，ｓhekｅｅpsthetrａdｉｎgrｕｌetoｈerｓeｌf．Ｔhiｓismosｔｃlosｅlyassｏciａtｅdwｉth___＿____.

?Ｂ.

ｓelectｉoｎbias?5９.

Aｔｆｒesｈmanｏrｉｅnｔａtion,1，５00ｓtudentsａｒeaskｅdｔｏflｉpａｃoiｎ20times.Onesｔudeｎtiscroｗｎeｄtheｗinｎeｒ(tossed20heaｄs).Thisisｍoｓtcloｓeｌyasｓｏciateｄwith＿＿______.

?Ｄ.

thｅｌucｋyeventissue?

60.

Ｓｅhun(１986）finｄsthaｔthｅprａctｉceofｍonitｏrｉngｉnｓidertｒadedｉsclｏsuｒｅs,andtradingonthａｔiｎｆｏｒmaｔｉｏｎ,ｗoulｄｂｅ＿_＿＿＿___.

E.

notsufｆicｉentlypｒｏfitaｂlｅtｏcoveｒｔraｄinｇcosts61.

Ifｙｏuｂeｌieｖeiｎthｅreverｓaleｆｆect,youshoulｄ

C.

ｓeｌlｓtｏｃksthisｐｅｒiodthatpeｒformedｗellｌastｐerｉod.?62.

PatelｌandＷｏｆｌｓon(1984）reportｔhatmoｓｔoftheｓtockpricerｅspoｎsetocorporaｔeｄivｉｄendoreａrningsannoｕnｃeｍeｎtsocｃｕｒswitｈｉn_______＿__＿_oｆｔｈeａnｎounｃｅmeｎt.

?C．

2hoｕrｓ

SｈｏrｔAnswerQuestｉons?

63.

Disｃussthｅｖarｉｏusformｓofmarketeｆｆiｃieｎcｙ.Iｎｃluｄeinyourdiscｕsｓioｎｔheinformatiｏnsetsinvolｖedineａcｈformaｎdtｈeｒｅlatｉoｎsｈipｓacｒossiｎｆormaｔｉonsetsandａcｒｏｓsｆoｒmsｏfmarｋeteffiｃiｅnｃｙ.Alsodiscuｓstheimplｉcａtionsfoｒthevariousformｓoｆmarketefficieｎcｙｆorthevaｒｉｏustyｐesoｆｓecuritieｓ＇ａnalysts．

Ｔheweaｋfｏrmｏｆtｈeeffiｃienｔｍarkｅｔshypｏthesis(EMＨ）sｔaｔeｓthａtstockpｒicesｉmmediatｅlyｒｅflectmaｒketdata.Markｅtdatａｒefｅrstostockpｒicesanｄｔrａdingvｏlume．Ｔechniｃｉansａttｅmｐttoprｅdiｃｔfuｔｕrｅｓtｏckprｉcｅsbaｓedonhｉｓｔoricsｔｏｃkpｒiceｍoveｍentｓ.Ｔhｕs,ｉftｈewｅakformｏftｈｅEMHholds,tｈeworｋoｆtｈeteｃhnicianisofnovａlｕe．

TｈesｅmistrongfｏｒmoftheEMHｓtatesthaｔstoｃｋpricesｉｎｃludeallpubｌicinformａtion.Thｉspubliｃinｆormationincluｄeｓmaｒkｅｔｄataａnｄaｌloｔherｐｕblicｌyavailablｅinfｏrmatiｏｎ,ｓｕcｈasfiｎanciaｌstａtemenｔs,aｎdａlｌinformａｔionrｅportedinｔhｅｐｒeｓｓrelevａｎｔtoｔheｆｉｒm.Ｔhuｓ,markeｔinfoｒｍａtｉoniｓasuｂseｔofallpuｂｌicinｆorｍatｉon.Aｓareｓuｌt,ｉftheｓｅmistrongfｏrｍｏftheEMＨｈｏｌｄs,theweakformmustholｄａｌso．Iｆｔheseｍｉstrongforｍｈｏｌds,thｅｎｔhefuｎdａmeｎtａｌiｓt,whoattemptstoｉｄentifyｕndervaluedsｅcurｉtiesｂyaｎalyzｉngpubliciｎfoｒmation,isｕnlikeｌytｏdosoｃonsistｅnｔlyｏvｅrｔｉｍe.Ｉnｆact,tｈewoｒkｏfthｅfunｄamentａｌisｔｍaｙmakethｅmarkｅtsｅvｅnmoreｅfｆiciｅnt！

ThestrｏngfｏrmｏftheEMHstatesthaｔaｌlinfoｒmatｉon(publicandprivａtｅ)ｉsｉmmｅdiateｌyｒeflｅｃtedｉnstockｐｒｉcｅｓ.Puｂｌｉｃｉnforｍatｉonisａsubsetofalｌinｆormation,thusifthestroｎｇformｏftheEＭHｈｏｌdｓ，ｔheｓｅmiｓtrｏnｇｆormmｕsthｏldalso.ＴhｅｓｔroｎｇｆoｒmofEMＨstａtesthａtevenwithiｎside(lｅｇalorｉllｅgaｌ）inｆormａｔｉon，onecaｎnotexpｅcttooutpｅｒｆormｔｈemａrｋetcoｎｓｉｓtenｔlyovertime．?Stｕdiesｈaｖeｓhｏwnｔhｅｗeaｋｆormtｏhold，wｈｅntranｓactｉｏnｓｃｏsｔｓaｒeｃonsidered.Stｕdiｅsｈａvesｈownthesemｉsｔrongｆoｒｍtohｏldｉngeneｒal,althoughｓｏmｅanｏｍalieｓhａvebeenobｓeｒvｅｄ.Sｔｕdieshａvesｈoｗnthａtｓoｍｅｉnｓiｄers(specｉａｌists，ｍａjｏｒsｈareholdｅｒs,majoｒcorporatｅofficｅrs）doｏuｔperfｏｒmtheｍarket．?Ｆｅｅdbacｋ:ThｅpurpoｓｅｏfthiｓquｅstiｏｎistoasｓurethatthestudｅｎtｕndeｒstaｎdｓtheinｔerrｅlatｉonshｉｐｓａcrossdifｆerｅnｔformsoftheEＭH,acrｏｓｓtｈeｉｎｆｏｒｍationsｅｔs,andthｅimplｉcaｔioｎsofeachforｍfordifferenttypesoｆａnalysｔｓ.?6４．

Whaｔｉｓaneventｓtudy?Itiｓａtestofｗｈatformofmarketefｆiciency?Ｄiscuｓｓcｅsｓofconductiｎganｅvｅntｓｔudy，includingthebeｓｔvａriａble(s)toobserｖeastesｔｓｏfmａｒkeｔefｆｉｃｉency.

Aｅｖenｔstuｄyisanempｉricaltestwhichallowstｈeｒeseａｒchertoasｓeｓｓtheiｍpａctｏfapartiｃulaｒｅventｏnaｆirm'sstｏｃkｐｒice．Tｏdｏsｏ,oneoftｅnｕseｓtheinｄeｘmodelandｅstiｍａtｅseｔ，theｒesiｄuａlｔeｒmwhichmeasuｒｅｓtheｆiｒm-spｅｃifｉponｅｎtｏfthestock'sｒｅｔurn．Tｈisvａrｉableiｓtｈedｉｆfereｎcebetｗeenthｅrｅturｎthesｔｏｃkwouldordinariｌyearnfｏragivenlｅvelofmａrketpｅｒfｏｒmanｃｅandtｈeactｕalratｅofreturｎonthｅstock.Thｉsmeasureisｏftｅnrｅferredtoastheaｂnｏｒmａｌreｔurnoftｈｅsｔocｋ．Hoｗeｖer,iｔｉsvｅｒydiｆfｉcuｌｔtｏｉdentifyｔheｅxacｔpoiｎtintimｅthａtaｎeventbecoｍeｓpubｌiciｎfｏrｍatｉon;ｔｈｕs，theｂettｅrmeａsureiｓthecumuｌativeabｎoｒmａｌreturｎ，whｉchiｓｔhesｕmｏｆabnormａlretuｒｎsoveraperiｏdoｆtime(ａwinｄowaｒouｎdｔheeｖｅｎtdaｔｅ)．

Ｔhisｔecｈｎｉｑuemaｙbeuｓｅｄtｏstuｄｙtｈeｅfｆｅctofanypｕblicevenｔonafｉrm'sstocｋprice；tｈus,thistechniqｕeisatesｔoftｈesｅmistrｏｎgfoｒmｏｆtheＥＭH.

Fｅedback:Therａtｉonａleforｔhisquｅstｉonistoascｅrｔainiｆｔｈestudentundersｔandsthｅmethodｏｌoｇｙｍoｓｔcoｍmｏnlyusedａｓatestoｆthesｅｍistrｏngｆｏrｍofmarkeｔefficieｎcy．

６5.

Discussthesmaｌｌｆｉrmefｆect,theｎeｇlｅcｔeｄfｉｒmeffｅct,andｔheJanuaryｅfｆeｃt，ｔhetaxeffｅcｔaｎdｈｏwtｈefourｅfｆectｓmayｂerｅｌａtｅd.

Studｉｅshaｖeshowntｈaｔsmallｆｉrｍｓeａrnarｉsk-adjuｓtｅdraｔeofretｕｒｎgreaterthanthatｏflａｒｇerfirｍs.Adｄｉｔioｎaｌstｕｄiesｈａvesｈoｗｎthatfirｍsthataｒeｎoｔｆoｌlowｅdbyaｎaｌyｓts（negｌectｅdｆirｍｓ)alｓohavｅarisｋ-adjustedreturｎｇreａtｅrthaｎthatoflarｇｅｒfirmｓ．Hｏweｖｅr,thenegｌectedfirｍstenｄtobｅsmallｆiｒmｓ;tｈuｓ,theｎegｌecteｄｆiｒｍeffeｃtmａyｂeamaｎifｅｓｔationoｆtｈesmallfirmeffｅｃｔ.Ｆinallｙ，studieshaveshownthatretｕrnsinJａｎｕarｙｔenｄtobehigherｔhaninotheｒmontｈsｏftheyeaｒ．Thiｓefｆeｃthａsbeｅnshoｗntopｅｒsisｔｃonsistｅntlyoｖｅrtheｙeａrs．Hoｗｅｖｅｒ,theJａｎｕａｒｙeｆfeｃtｍaｙbetｈetaxeffeｃｔ，aｓinvｅｓｔorsmayｈaveｓoldstocｋswithloｓsesinＤｅｃemberfortaxpurposesanｄｒｅinｖestｅｄinJanuａry.Sｍaｌｌfｉrｍs(ａｎdnｅｇｌｅcteｄfｉrms）woulｄtendtobemoreafｆecteｄｂythisinｃrｅaseｄbuｙｉngthanlargerfirｍs，ａsｓmallfirmｓtendtoseｌlfｏrlｏwｅrｐｒｉｃeｓ.?Feedback：Theｐuｒｐoｓeoftｈiｓqueｓtionistoｒeinfoｒceｔheiｎterｒeｌaｔionships，thａt"ｅffects＂ｍaynotaｌwａyｓｂeindepenｄentａndｔｈuｓreadilyideｎtｉfｉaｂle．Alsotｈｅseeffｅｃtsａrewidｅlｙdisｃussedintｈefinancｉaｌpresｓ,aｎdtheＪaｎuaｒyefｆeｃtappearstobｅquｉtｅｐersisteｎt.66.

Whymightthedegreｅoｆmａｒkｅtefficｉeｎcydiffeｒacrossvariｏusmａｒkets?Ｓtatethrｅｅｒｅａsonsｗｈyｔｈｉsmiｇhtoｃcurandｅxｐlaineacｈrｅaｓonbriefly.

1.Mａｒkeｔｅffiｃieｎcydependｓoninｆorｍationｂｅｉｎgesseｎtiallyfｒｅeandcｏsｔlesstomaｒketｐａrｔｉcipants.IｎtheU.Ｓ.ｍaｒkｅtsｔhisisthecasｅtoａlargeｅｘtent.ThｅU．S．mａrketsarewelldevelｏｐedandprｏfesｓionａlａnａlystsoftｅnfoｌｌｏｗｓecuｒｉties.Infoｒmaｔioniｓavaiｌabｌｅｏnteleｖｉsion,ｉnｔhepｒess，anｄonｔheＩnteｒneｔ.Ｔhｅoｐｐoｓiｔemaybetrueｉnotheｒmaｒkeｔs,sｕcｈasｔｈoseofdevelｏｐｉｎgｃｏuntries,ｗｈeｒｅtherearｅfeｗeroｒnoanａlystｓanｄfewmａrketpａrtiｃｉpantsｗｉtｈｔhｅseｒesｏurｃes.２.Aｃcｏunｔｉnｇdisｃlｏsuｒerｅquirｅmeｎtsａrｅdiｆfereｎtａcrossmaｒｋets.InｔｈｅU．S．firmsｍustmeｅtSＥCrｅquｉrementstobeｐubliｃｌyｔraded.Iｎotｈerｃoｕｎｔriestherequiremeｎtsmaybedifｆｅreｎｔornoneｘisteｎｔ．Thｉshasimpliｃaｔiｏnsabouttｈeeaｓeｗｉtｈｗｈｉchanaｌystsｃａnevａluatetｈｅcoｍpanｙｔoｄeterｍｉｎeitspropervａｌue.3.Ｍarｋetｓfｏr"neglecteｄ"stｏcｋsmaybeｌesseffｉciｅntｔｈanmarｋeｔsfoｒstocｋｓtｈaｔareｈeavilyfolｌowedbｙanaｌystｓ.Ifanａlyｓｔsfeｅlthａtｉtisnｏtworthwhiletｏgivethｅiｒaｔtentiontopａrｔicularsｔockｓｔheｎampleinfｏrmａｔｉonaboｕtｔhesesｔocｋswｉllnｏtbｅreadｉlｙaｖailabletoｉnvestors.

Fｅｅdｂａck:Ｔhisquesｔiｏnlｅadstheｓtｕdentｔolookatsomeoftｈefuｎdamentaｌrｅaｓoｎｓｆｏrmarｋetefｆicｉencyanｄwｈytheremayｂedifferencesamonｇmarketsｗitｈreｇａrdtothｅreａsons.Alteｒnativeanｓwerｓaｒepossｉble.67.

Withｒegardtomarkeｔeｆfiｃiency,whatｉsｍｅａntbythe