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picture1_0825 14 Tugas Financial Theory Per 8


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File: 0825 14 Tugas Financial Theory Per 8
give an explanation of each answer and choose the most correct 1 if you believe in the form of the emh you believe that stock prices reflect all relevant information ...

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                Give an explanation of each answer and choose the most correct: 
                     1.  If you believe in the             form of the EMH, you believe that stock prices reflect all 
                         relevant information including historical stock prices and current public information 
                         about the firm, but not information that is available only to insiders. 
                         A)  semistrong 
                         B)  strong 
                         C)  weak 
                         D)  A, B, and C 
                         E)  none of the above 
                              
                The efficient market hypothesis (EMH), alternatively known as the efficient market theory, is a 
                hypothesis that states that share prices reflect all information and consistent alpha generation  is 
                impossible. 
                 
                 2. Proponents of the EMH typically advocate 
                         A)  an active trading strategy. 
                         B)  investing in an index fund. 
                         C)  a passive investment strategy. 
                         D)  A and B 
                         E)  B and C 
                  The efficient market hypothesis (EMH) or theory states that share prices reflect all information. 
                  The EMH hypothesizes that stocks trade at their fair market value on exchanges. 
                  Proponents of EMH posit that investors benefit from investing in a low-cost, passive portfolio. 
                  Opponents of EMH believe that it is possible to beat the market and that stocks can deviate 
                   from their fair market values. 
                 
                 3. If you believe in the          form  of  the  EMH,  you  believe  that  stock  prices  reflect  all 
                         information that can be derived by examining market trading data such as the history of 
                         past stock prices, trading volume or short interest. 
                         A)  semistrong 
                         B)  strong 
                         C)  weak 
                         D)  all of the above 
                         E)  none of the above 
                 
                The weak-form hypothesis asserts that stock prices already reflect all the information that can be 
                derived by examining market trading data, such as the history of past prices, trading volume, or 
                short interest. This implies that trend analysis is fruitless: if such data ever conveyed reliable 
                signals about future performance, all investors would have become familiar with such signals 
                already. 
                         
                 4. If you believe in the             form of the EMH, you believe that stock prices reflect all 
                         available information, including information that is available only to insiders. 
                         A)  semistrong 
                         B)  strong 
                 
                 
                                    C)  weak 
                                    D)  all of the above 
                                    E)  none of the above 
                        
                       The strong-form hypothesis states that stock prices reflect all information (from public and private 
                       sources)  relevant  to  the  firm,  including  information  available  only  to  company  insiders.  This 
                       version of EMH encompasses both the weak-form and the semi-strong-form EMH. It is quite 
                       extreme. It implies that no investor has monopolistic access to information that influences prices. 
                       Thus, no investor can consistently derive risk-adjusted excess returns. In fact, the strong-form 
                       EMH assumes perfect markets, in which all information is cost-free and available to everyone at 
                       the same time. In contrast, in an efficient market prices adjust rapidly to new public information. 
                        
                        5. If you believe in the reversal effect, you should 
                                    A)  buy bonds in this period if you held stocks in the last period. 
                                    B)  buy stocks in this period if you held bonds in the last period. 
                                    C)  buy stocks this period that performed poorly last period. 
                                    D)  go short. 
                                    E)  C and D 
                        
                       A reversal is a change in the price direction of an asset. A reversal can occur to the upside or 
                       downside. Following an uptrend, a reversal would be to the downside. Following a downtrend, a 
                       reversal  would  be  to  the  upside.  Reversals  are  based  on  overall  price  direction  and  are  not 
                       typically based on one or two periods/bars on a chart. 
                        
                        6.                      focus more on past price movements of a firm's stock than on the underlying 
                                    determinants of future profitability. 
                                    A)  Credit analysts 
                                    B)  Fundamental analysts 
                                    C)  Systems analysts 
                                    D)  Technical analysts 
                                    E)  Specialists 
                        
                       The assumptions of technical analysis directly oppose the notion of efficient markets. 
                                  The process of disseminating new information takes time. 
                                  Stock prices move to new equilibriums in a gradual manner. 
                                  Hence, stock prices move in trends that persist. 
                       Therefore,  technical  analysts  believe  that  good  traders  can  detect  the  significant  stock  price 
                       changes before others do. However, as confirmed by most studies, the capital market is weak-
                       form efficient as prices fully reflect all market information as soon as the information becomes 
                       public. Though prices may not be adjusted perfectly in an efficient market, it is unpredictable 
                       whether the market will over-adjust or under-adjust at any time. Therefore, technical analysts 
                       should not generate abnormal returns and no technical trading system should have any value. 
                        
                        7. A long term movement of prices, lasting from several months to years is called                                                                   . 
                                    A)  a minor trend 
                                    B)  a primary trend 
                                    C)  an intermediate trend 
                        
                        
                                    D)  trend analysis 
                                    E)  B and D 
                        
                       Minor trends are merely day-to-day price movements; intermediate trends are "corrections", or 
                       offsetting movements in one direction after longer-term movements in another direction; trends 
                       lasting for the period described above are primary trends 
                        
                        8.                    above which it is difficult for the market to rise. 
                                    A)  Book value is a value 
                                    B)  Resistance level is a value 
                                    C)  Support level is a value 
                                    D)  A and B 
                                    E)  A and C 
                        
                       It is difficult to identify specific factors that influence the market as a whole. The stock market is 
                       a complex, interrelated system of large and small investors making uncoordinated decisions about 
                       a huge variety of investments. "The market," so to speak, is not a living entity. Instead, it is just 
                       shorthand for the collective values of individual companies. 
                       There are basic economic principles that can help explain any up and down market movements, 
                       and with experience and data, there are more specific indicators market experts have identified as 
                       being significant. 
                        
                        9.                      was the grandfather of technical analysis. 
                                    A)  Harry Markowitz 
                                    B)  William Sharpe 
                                    C)  Charles Dow 
                                    D)  Benjamin Graham 
                                    E)  none of the above 
                        
                       Charles Henry Dow (November 6, 1851 – December 4, 1902) was an American journalist who 
                       co-founded Dow Jones & Company with Edward Jones and Charles Bergstresser. Dow also co-
                       founded  The  Wall  Street  Journal,  which  has  become  one  of  the  most  respected  financial 
                       publications  in  the  world.  He  also  invented  the Dow  Jones  Industrial  Average as  part  of  his 
                       research  into  market  movements.  He  developed  a  series  of  principles  for  understanding  and 
                       analyzing  market  behavior  which  later  became  known  as Dow  theory,  the  groundwork 
                       for technical analysis. 
                        
                        10. A daily fluctuation of little importance is called                                                    . 
                                    A)  a minor trend 
                                    B)  a primary trend 
                                    C)  an intermediate trend 
                                    D)  a market trend 
                                    E)  none of the above 
                        
                       Trend minors usually last from a few days to several weeks. This is commonly described as a 
                       small wave on a wave. The line is simply a horizontal line extending on the daily chart. Usually 
                       formed in anticipation of some important news or economic announcements. Or in short, the Dow 
                       Theory states that a Major Trend in a market can be more than one year or even several years. 
                        
                        
                Secondary Trend that occurs as a result of a momentary correction, is considered a natural or 
                temporary decline in the Major Trend and has a time limit of between three weeks to three 
                months. Meanwhile, Minor Trend, which has the shortest time limit, generally lasts less than three 
                weeks. Minor Trend This is the price fluctuation that occurs in the Secondary Trend. These trends 
                interact with each other over an indefinite period of time, from very short spanning minutes per 
                minute, to very long periods of time. 
                 
                 11. A trin ratio of less than 1.0 is considered as a              . 
                         A)  bearish signal 
                         B)  bullish signal 
                         C)  bearish signal by some technical analysts and a bullish signal by other technical 
                              analysts 
                         D)  bullish signal by some fundamentalists 
                         E)  C and D 
                 
                Bullish divergences are, in essence, the opposite of bearish signals. Despite their ease of use and 
                general informational power, trading oscillators tend to be somewhat misunderstood in the trading 
                industry, even considering their close relationship with momentum. At its most fundamental level, 
                momentum is actually a means of assessing the relative levels of greed or fear in the market at a 
                given point in time 
                 
                 12.                the return on a stock beyond what would be predicted from market movements 
                         alone. 
                         A)  An excess economic return is 
                         B)  An economic return is 
                         C)  An abnormal return is 
                         D)  A and B 
                         E)  A and C 
                 
                The correlation coefficient between stock returns for two non-overlapping periods should be zero. 
                If not, one could use returns from one period to predict returns in later periods and make abnormal 
                profits 
                 
                 13. The debate over whether markets are efficient will probably never be resolved because of 
                 
                         A)  the lucky event issue. 
                         B)  the magnitude issue. 
                         C)  the selection bias issue. 
                         D)  all of the above. 
                         E)  none of the above. 
                 
                Markets can be efficient even if some investors earn returns above the market average. Consider 
                the  Lucky  Event  issue:  Ignoring  transaction  costs,  about  50%  of  professional  investors,  by 
                definition, will “beat” the market in any given year. The probability of beating it three years in a 
                row, though small, is not insignificant. Beating the market in the past does not predict future 
                success as three years of returns make up too small a sample on which to base correlation let 
                 
                 
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...Give an explanation of each answer and choose the most correct if you believe in form emh that stock prices reflect all relevant information including historical current public about firm but not is available only to insiders a semistrong b strong c weak d e none above efficient market hypothesis alternatively known as theory states share consistent alpha generation impossible proponents typically advocate active trading strategy investing index fund passive investment or hypothesizes stocks trade at their fair value on exchanges posit investors benefit from low cost portfolio opponents it possible beat can deviate values be derived by examining data such history past volume short interest asserts already this implies trend analysis fruitless ever conveyed reliable signals future performance would have become familiar with private sources company version encompasses both semi quite extreme no investor has monopolistic access influences thus consistently derive risk adjusted excess retu...

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