1) Suppose a manager earns a positive alpha for a yearof investing. Efficient market hypothesis explains thisas:

A. the manager got lucky.

B. the manager took high risk.

C. both (A) and (B) are true.

D. none of the above

2) Suppose a manager earns a positive alpha for a yearof investing. Efficient market hypothesis explains thisas:

A. the manager got lucky.

B. the model of risk which produced the result wasflawed or incomplete.

C. both (A) and (B) are possible.

D. none of the above

3) If the stock market is semi-strong form efficient,then:

A. it’s possible for technical analysis to beat themarket consistently, but not fundamental analysis

B. it’s possible for fundamental analysis to beat themarket consistently, but not technical analysis

C. it’s possible for both technical analysis andfundamental analysis to beat the market consistently

D. it’s not possible for technical analysis orfundamental analysis to beat the market consistently

4) Which of following would violate the efficient markethypothesis?

A. evidence shows that individual investors are oftenirrational in their decision making

B. evidence shows that stock investors earn higherreturns on average than bond investors

C. Both A) and B)

D. None of the above

5) Limits to arbitrage:

A. include costs of trading

B. include model risk

C. both (A) and (B) are correct

D. none of the above

6) Limits to arbitrage:

A. include forecasting errors

B. include regret avoidance

C. both (A) and (B) are correct

D. none of the above

7) Research shows that investors commonly make thefollowing mistake:

A. overestimate the likelihood of rareevents

B. continue to hold profitable investments longer thanthey should

C. both (A) and (B)

D. none of the above

8) Research shows that investors commonly make thefollowing mistake:

A. sell profitable investments sooner than theyshould

B. continue to hold losing investments longer than theyshould

C. both (A) and (B)

D. none of the above