Test your knowledge

Choose wisely. There is only one correct answer to each question.

Keep studying!

Review your answers below to learn more.

Security prices can be predicted in an efficient market.

Choose wisely. There is only one correct answer.

True

False

False. According to the theory, only new information can change prices, so predictions will not work.

In an efficient market, _______.

Choose wisely. There is only one correct answer.

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.

A market index represents the entire market.

Choose wisely. There is only one correct answer.

True

False

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

Index mutual funds attempt to beat the market.

Choose wisely. There is only one correct answer.

True

False

False. Index funds try to match the market.

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

Choose wisely. There is only one correct answer.

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.

© Copyright 2024 Morningstar, Inc. All rights reserved. Morningstar, the Morningstar logo, Morningstar.com, Morningstar Tools are either trademark or service marks of Morningstar, Inc. In addition, we encourage you to read this important disclosure.