[Solved] Mean Reversion Refers to the Fact That

Rules used to predict movements in stock prices based on past patterns are,according to the efficient markets hypothesis A)a waste of time. B)profitably employed by all financial analysts. C)the most efficient rules to employ. D)consistent with the random walk hypothesis.

Tests used to rate the performance of rules developed in technical analysis conclude that technical analysis A)outperforms the overall market. B)far outperforms the overall market,suggesting that stockbrokers provide valuable services. C)does not outperform the overall market. D)does not outperform the overall market,suggesting that stockbrokers do not provide services of any value.

Which of the following accurately summarize the empirical evidence about technical analysis? A)Technical analysts fare no better than other financial analysis-on average they do not outperform the market. B)Technical analysts tend to outperform other financial analysis,but on average they nevertheless under-perform the market. C)Technical analysts fare no better than other financial analysis,and like other financial analysts they outperform the market. D)Technical analysts fare no better than other financial analysis,and like other financial analysts they under-perform the market.

The small-firm effect refers to the A)negative returns earned by small firms. B)returns equal to large firms earned by small firms. C)abnormally high returns earned by small firms. D)low returns after adjusting for risk earned by small firms.

The January effect refers to the fact that A)most stock market crashes have occurred in January. B)stock prices tend to fall in January. C)stock prices have historically experienced abnormal price increases in January. D)the football team winning the Super Bowl accurately predicts the behavior of the stock market for the next year.

When a corporation announces a major decline in earnings,the stock price may initially decline significantly and then rise back to normal levels over the next few weeks. This impact is called A)the January effect. B)mean reversion. C)market overreaction. D)the small-firm effect.

A phenomenon closely related to market overreaction is A)the random walk. B)the small-firm effect. C)the January effect. D)excessive volatility.

Excessive volatility refers to the fact that A)stock returns display mean reversion. B)stock prices can be slow to react to new information. C)stock price tend to rise in the month of January. D)stock prices fluctuate more than is justified by dividend fluctuations.

Evidence in support of the efficient markets hypothesis includes A)the failure of technical analysis to outperform the market. B)the small-firm effect. C)the January effect. D)excessive volatility.

Evidence against market efficiency includes A)failure of technical analysis to outperform the market. B)the random walk behavior of stock prices. C)the inability of mutual fund managers to consistently beat the market. D)the January effect.