Test your knowledge

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Keep studying!

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Index funds attempt to _______ the market.

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Predict

Match

Outperform

Match. Index funds try only to match the market.

In an efficient market, only new information about a security can change its price.

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True

False

True. According to the theory, prices react to new information.

A market index represents the entire market.

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True

False

False. A market index represents a segment of the entire market.

In an efficient market, _______.

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Investors act rationally

Transaction costs are minimal

Information is translated as fast as possible

All of the above

All of the above. These are all essential if a market is to be efficient.

What findings about stocks threw the efficient market theory into question?

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Stock splits

Dividend increases

Insider buying

All of the above

Only one of the above.

All of the above. All of these have been found to affect stock prices in ways that called efficiency into question.

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