Select an Answer: prices over a specified time period. historical prices and returns. price at a specified time. transaction costs.
prices of odd lot transactions.
Rationale:
Unlike work done under the random walk hypothesis, which dealt with the price movement over time, the fair game model deals with price at a specified point in time.
2025-05-30
Question: If filter rules in trading consistently produced abnormal risk-adjusted returns, the market could be, at the very least, ________ inefficient.
Select an Answer: none of these answers semi-strong form strong form weak form
Rationale:
A filter rule is a common technical analysis tool in which an investor buys or sells assets based on the horizon return (e.g., a 1-day return) exceeding or falling below a certain specified level called the "filter level." Thus, filter rules use past stock price data. If they produced abnormal risk-adjusted returns they could potentially represent a violation of the weak-form of market efficiency (and hence, also the semi-strong and strong forms of market efficiency). Note, however, that a seeming violation, in itself, is not enough to disprove the hypothesis. One needs to evaluate many of the assumptions and econometric methods used before throwing out the hypothesis.
2025-05-29
Question: There are many factors to be considered when constructing a market index. Which of the following are important?
weighting of sample members
volatility of sample
size of sample
breadth of sample
sources of sample
use of sample
computational procedures
price earnings ratio of sample
international dispersion of sample
Select an Answer: 1, 2, 5, 9
all of these answers 1, 3, 4, 6, 7 1, 3, 4, 5 1, 3, 4, 5, 7
Rationale:
When constructing a market index the weighting of sample components, size of the sample, breadth of the sample, and sources of the sample as well as the computational procedure used to calculate the index must be considered. The use and volatility of the sample are not directly relevant to the index construction process.
2025-05-28
Question: Which of these statements about price-weighted series is incorrect?
Select an Answer: A price-weighted series is influenced by the differential prices of the components. The DJIA, a price-weighted series, is composed of 100 small technology stocks. In a price-weighted series, when companies have a stock split their stock price declines and thus their weight in the index is reduced. Each of these statements is correct.
Rationale:
The DJIA is composed of 30 large, well-known industrial stocks which are leaders in their industry (blue chip) and are listed on the NYSE.
2025-05-27
Question: A Stock Market indicator in which all stocks carry equal weight regardless of their price and/or market value is known as which of the following?
Select an Answer: price-weighted series value-weighted series unweighted series leading indicator
aggregate benchmark actuarial table
Rationale:
An unweighted series assigns equal value to all of the component stocks regardless of their price or market value. Thus a $10 stock is as important as a $50 stock. Additionally, the total market value of the company is not important to the indicator. A price-weighted series (such as the Dow Jones Industrial Average) is an arithmetic average of stock prices. A value-weighted series (such as the NASDAQ Composite Index) derives a base value from the initial total market value of all the composite stocks and uses this base as a comparison for future values.
