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Q:
A high short interest ratio is considered bullish.
Q:
______________ analysis focuses on charts and graphs based on internal market data, while _____________ analysis emphasizes earnings reports, management capabilities, and new product development.
A.Technical; fundamental
B.Fundamental; technical
C.Technical; external
D.Technical; semi-strong
Q:
The short interest ratio is the total short sales position, divided by average daily exchange volume for the month.
Q:
When short sellers are bearish, it is thought to be a bullish signal.
Q:
Short-selling by individual investors provides future demand potential to cover their short position.
Q:
Odd-lot traders have never outguessed professional traders.
Q:
Under normal circumstances, the Barron's Confidence Index is between 100 and 200.
Q:
Odd-lot traders traditionally are assumed to be strong sellers right before the bottom of a bear market, but this is not always the case.
Q:
Point and figure charts emphasize significant price changes and price reversals.
Q:
The Barron's Confidence Index is based on the premise that bond traders, being more sophisticated than stock traders, pick up trends more quickly.
Q:
Chartists do not consider volume significant in reading market indicators.
Q:
The support level is the stock price that generates new demand, while the resistance level is the price at which investors begin to sell in order to take a profit.
Q:
A support level signals new demand.
Q:
The idea that stock prices tend to move in trends that persist for long periods, and that these trends can be detected in charts, are basic assumptions of fundamental analysis.
Q:
The Dow Theory puts emphasis on long-run trends.
Q:
Anomalies related to the semi-strong form of the efficient market hypothesis indicate that:A.the market is truly efficient.B.high returns are very difficult to achieve.C.the market is less than perfectly efficient.D.public information is almost useless.
Q:
Technical analysis assumes that many chart patterns tend to repeat themselves.
Q:
The semi-strong form of the efficient market hypothesis says that investors are not able to use _____________ information for their gain.
A.public
B.insider
C.charting
D.leading indicators
Q:
The three forms of the efficient market hypothesis (not in any particular order) are stated as:
A.weak, semi-strong, and superior.
B.weak, normal, and strong.
C.semi-strong, weak, and strong.
D.semi-strong, normal, and superior.
Q:
Mutual fund cash positions are not generally a reliable indicator of market health or activity.
Q:
Divergence between advances and declines on the New York Stock Exchange and the Dow Jones Industrial Average may signal a reversing trend in the market.
Q:
The semi-strong form of the efficient market hypothesis maintains that:
A.all public and private information is already impounded into the value of a security.
B.there is no relationship between past and future prices.
C.all public information is already impounded into the value of a security.
D.insider information is immediately impounded into the value of a security.
Q:
Research on the strong form shows that _______ are able to achieve superior returns.
A.members of the SEC
B.corporate insiders and public officials
C.market specialists and corporate insiders
D.the majority of professional mutual fund managers
Q:
Studies of the small-firm effect indicate that there may be superior return potential in investing in smaller-capitalization firms, because:
A.the high P/E ratios of many of these firms eventually lead to superior returns.
B.smaller firms have fewer expenses, therefore, making more money for their investors.
C.there is less efficiency in this segment of the market, due to minimal institutional participation.
D.smaller firms are always growing, along with the returns that their investors receive.
Q:
The strong form of the efficient market hypothesis states that:
A.a market is more than highly efficient; it is actually perfect.
B.it is easy to beat the market.
C.mutual fund managers are superior performers.
D.None of the above
Q:
The semistrong form of the efficient market hypothesis maintains all of the following, except that:
A.there is no learning lag in the distribution of public information.
B.all public information is immediately impounded into the value of a security.
C.technical analysis is helpful in determining whether a stock is overvalued or undervalued.
D.fundamental analysis cannot outperform the market.
Q:
Firms with low P/E ratios that are often neglected by major investors seem to provide:
A.an inferior risk-adjusted return.
B.a superior risk-adjusted return.
C.a superior return, not adjusted for risk, though.
D.No return
Q:
Research on the weak form of the efficient market hypothesis suggests that:
A.stock prices are independent over time.
B.past trends cannot be used to predict the future.
C.charting and technical analysis have limited value.
D.More than one of the above
Q:
A good reason for a stock repurchase is:
A.that management believes that the stock is undervalued in the market.
B.so the company can escape the threat of a future merger or acquisition.
C.to avoid obligations under an employee stock ownership plan.
D.None of the above
Q:
The _________ of the efficient market hypothesis suggests that there is little or nothing to be gained from studying past stock price trends.
A.weak form
B.semi-strong form
C.strong form
D.semi-weak form
Q:
Prominent research on the small firm effect has been done by:
A.Fama and Roll.
B.Fama and French.
C.French and Roll.
D.Banz and Reinganum.
Q:
The weak form of the efficient market hypothesis can be tested by utilizing
A.tests of independence.
B.regression analysis.
C.trading rule tests.
D.A and C
Q:
Banz's research on the small firm effect was criticized because
A.the stocks were too small.
B.it was highly influenced by a depression and a major war.
C.the stocks were too large.
D.it was highly influenced by inflation and a devaluation of the dollar.
Q:
The basic premise of ________________ is that past trends in market movements can be used to forecast or understand the future.
A.the Efficient Market Hypothesis
B.fundamental analysis
C.technical analysis
D.None of the above
Q:
Which of the following is NOT a reason for the failure of investment in small firms to catch on as an important strategy?
A.There is a lack of institutional investors
B.Information on these smaller firms increases the efficiency of the market
C.Some investors are not properly positioned for the segmented market
D.All of the above are reasons
Q:
The week-end effect indicates that stocks tend to ___________ on Friday and ___________ on Monday.
A.decline; peak
B.decline; decline
C.peak; peak
D.peak; decline
Q:
The Small Firm Effect is the theory that:
A.firms with small market capitalization outperform the market.
B.small firms have greater market capitalization.
C.transaction costs associated with dealing in larger capitalization firms might severely cut into profit potential.
D.More than one of the above
Q:
The January upward stock movement effect is often linked to:
A.surprise earnings.
B.tax considerations.
C.early in the year enthusiasm.
D.the neglect effect.
Q:
What is market capitalization?
A.The total owners' equity in a firm
B.The total marketable assets of a firm
C.Shares outstanding multiplied by the market value of the stock
D.None of the above
Q:
An unexpected earnings surprise refers to the situation where:
A.announced earnings were in line with analysts' favorable earnings expectations.
B.announced earnings were better or worse than the analysts' forecast number.
C.announced earnings were significantly below last year's earnings.
D.the operating and financial leverage caused earnings to accelerate coming out of the trough of a business cycle.
Q:
Why does a stock repurchase improve the after-tax position of stockholders over cash dividends?
A.The theoretical increase in value is taxed at the lower capital gains rate
B.Reduced shares outstanding increase earnings per share
C.Cash dividends are taxed as ordinary income
D.All of the above
Q:
Value Line's Ranking System, covering 1,700 companies, has demonstrated:
A.that stocks ranked one under-perform the market.
B.that stocks ranked five perform about at the market average.
C.that stocks ranked one outperform the market.
D.that stocks ranked five outperform the market.
Q:
A study indicated that what type of stock had the best performance four years after announcement of a stock repurchase?
A.Growth stocks
B.Convertible preferred stocks
C.Low-yield stocks
D.Value-oriented stocks
Q:
The study by Fama and French maintains that the lower the ratio of market value to book value, the:
A.more overvalued the stock price.
B.higher the potential return on the stock.
C.higher the expected growth in earnings.
D.lower the expected growth in earnings.
Q:
Once management announces that it will buy back one million shares over a given time period, as circumstances become appropriate,
A.it is legally obligated to buy all one million shares back.
B.it is not legally obligated to buy any or all one million shares back.
C.it must buy back the number of shares that are equal to income in a given year (up to one million shares).
D.it must buy back the number of shares that are equal to income minus common stock dividends in a given year (up to one million shares).
Q:
One reason a firm may repurchase its own shares is:
A.that management views the firm's future prospects to be bright.
B.to go public.
C.to qualify for an exchange listing.
D.to adhere to SEC requirements on number of shares outstanding.
Q:
An acquisition may be canceled because of any of the following except:
A.antitrust action.
B.an unusually high premium on stock price.
C.a lawsuit brought by stockholders.
D.disapproval of the target company's management.
Q:
The major problem associated with trying to profit from mergers and acquisitions is
A.that contradictory information is available.
B.pinpointing reasons for stock price changes.
C.the threat of cancellation.
D.None of the above
Q:
All of the following are minimum listing requirements for a New York Stock Exchange listing except:
A.the market value of publicly held shares should be at least $100 million.
B.there should be at least 2,000 round lot holders.
C.there should be at least 1,200 employees.
D.a total of at least 1,100,000 shares should be held publicly.
Q:
Legal methods for attempting to profit through mergers and acquisitions include all of the following, except identifying
A.an insider close to the information.
B.candidates through financial or operating characteristics.
C.securities which are undergoing unusual volume or pricing patterns.
D.industries where companies are being absorbed.
Q:
When should an investor in OTC stock approved for listing sell the stock, if the objective is to maximize profit?
A.Immediately prior to approval
B.When the approval is published
C.On the date of listing
D.Four to six weeks after the date of listing
Q:
The stock price of an acquisition candidate changes dramatically prior to announcement because of:
A.the candidate's estimated cost of capital.
B.the high premium offered for the stock of the candidate.
C.information leaks.
D.More than one of the above
Q:
Which of the following is NOT an advantage of listing a stock on an exchange?
A.A market for the stock is maintained by a specialist
B.Minimum size and performance criteria for listing are quite restrictive
C.There is usually a significant increase in stock price upon approval for listing
D.More than one of the above
Q:
From the time prior to announcement until an acquisition takes effect, the value of the stock of the acquiring company will likely:
A.rise sharply.
B.rise sharply, then slowly fall.
C.remain largely unchanged.
D.fall slowly, then rise sharply.
E.None of the above
Q:
Besides management and prior performance, what primary factors should be considered by the investor in a new issue?
A.The intended use of funds from the issue
B.Expected stock price in the secondary market
C.The investment banker handling the distribution
D.More than one of the above
Q:
"Special or abnormal returns" refer to:
A.the Efficient Market Hypothesis.
B.gains in excess of the market risk-adjusted average.
C.convertibles and warrants, etc.
D.More than one of the above
Q:
Studies have shown that the best time to sell an unseasoned issue is:
A.prior to announcement of a merger.
B.shortly after the initial distribution.
C.after one year of trading.
D.More than one of the above
Q:
To be guilty of insider trading, one must be an officer of the company involved.
Q:
All of the following are reasons why an investment banker may under-price a new stock issue, except:
A.to stimulate demand for the issue.
B.to reduce unwanted inventory.
C.to insure adequate demand in the secondary market.
D.None of the above
Q:
Specialists and mutual fund managers tend to enjoy superior market performance on a risk-adjusted basis.
Q:
New stock issues are considered a special investment situation, because
A.they exhibit a very good long-term investment potential.
B.the spread is greater than that in the secondary market.
C.there is some evidence that new issues are under-priced.
D.More than one of the above
Q:
Analysts generally are not influenced by accounting changes that have no economic consequences.
Q:
In a merger, a white knight is:
A.a helpful investment banker that makes sure the merger is successful.
B.a third company that buys the acquisition target before an unwanted suitor can.
C.an investor who pays a high price to buy at least 5% of the shares of the acquisition target.
D.a commercial banker that provides a guarantee that the financing for the merger will be available.
Q:
The strong form of the EMH is generally confirmed by research evidence.
Q:
Which of the following is a characteristic of an unfriendly takeover?
A.Usually there is a high premium on stock price
B.An unacceptable suitor attempts to buy out the target company
C.The White Knight may succeed in rescuing the target company
D.All of the above
Q:
Positive abnormal returns on stocks may represent a measurement error.
Q:
The semi-strong form of the EMH is generally confirmed by research evidence, with some exceptions.
Q:
Research indicates that stocks tend to peak in value on Friday and generally decline in value on Monday.
Q:
The weak form of the EMH is generally confirmed by research evidence.
Q:
Of particular interest to stock repurchases is the fact that most of the negative market movement comes on after the announcement, rather than before it.
Q:
Acceptance of the weak form of the EMH would indicate that charting can lead to profits.
Q:
The best strategy in a new public offering is often to sell the stock shortly after it becomes public.
Q:
The strong form of the efficient market hypothesis suggests that only insiders are able to show superior risk-adjusted returns.
Q:
The primary reason for the upward market movement in the value of the acquisition candidate is the low premium that is offered over current market value in a merger or acquisition.
Q:
Under the weak form of the efficient market hypothesis, stock prices are considered to be independent over time.
Q:
In the bull market of the 1990s, many firms repurchasing their own shares were among the strongest and most respected companies on Wall Street.
Q:
OTC stocks may not uphold the semi-strong form of the efficient market hypothesis, while listed stocks generally do.
Q:
Stocks that report unexpected positive earnings surprises seem to provide superior performances relative to the market.
Q:
Institutional investors often take advantage of the small firm effect.
Q:
Value Line Group 5 Stocks tend to have the strongest performance.