Question

1a.According to the semi-strong form of the efficient market hypothesis:

A. Private information is of no help in earning abnormally high returns.

B. Using past price and volume information, one can earn abnormally high returns from stocks.

C. Using insider information, one can earn abnormally high returns from stocks.

D. Financial statement analysis cannot be used to earn abnormally high returns from stocks.

E. Equity Analysts are always correct in predicting the best stocks.

1b. The duration of a 270-day T-Bill is (in years)

A. 0.493.

B. 0.246.

C. 1.

D. 0.7397

E.indeterminate.

Answer 1

1a. According to the semi-strong form of the efficient market hypothesis-

(C) Using insider information, one can earn abnormally high returns from stocks.

Semi-strong efficiency of EMH form contends that a security's price movements are a reflection of publicly available material information. It suggests that fundamental and technical analysis are useless in predicting a stock's future price movement since it is based on public information. Abnormally large profits cannot be consistently earned using public information.

1b. The duration of 270 day T-bill is (in years)

(D)0.7397

270/365 = 0.7397