Question 16 1 pts An efficient market requires that: all investors are rational

Question

Question 16 1 pts An efficient market requires that: all investors are rational and react quickly to new information. new information does not have a significant effect on market prices. information can be obtained at a considerable cost by investors investors react quickly and fully to new information. Question 17 1 pts A test which investigates whether publicly available financial accounting information can be used to generate abnormal returns is a direct test of: O strong form market efficiency. O weak form market efficiency. mean variance market efficiency. semi-strong form market efficiency. ong-Li··..pdf XLS309-XLS-ENG.xls

Explanation / Answer

16. An efficient market requires that all investors are rational and react quickly to new information. There is no scope for inside information and markets reacts quickly to the new information.

So choice A is the right answer.

17. A test which investigates whether publicly available financial accouting information can be used to generate abnormal returns is a direct test of weak form market efficiency.

So Choice B is the correct.

It is the weak form market efficeincy where abnormal returns are possible from public information. In semi strong market, abnormal returns are possible from insider information (or information which is not yet public) and in strong form market effiecieny, there is no possibility for abnormal return.

20. In an efficieny market, the expected abnormal return on a security is equal to risk free rate of return as it is not possible for abnormal return in efficient market.

So choice A is the correct option.

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