1.

Even if the semi-strong version of the efficient market hypothesis is true, it might be possible to earn
extraordinary returns from private information not available to other investors.

 True. The semi-strong form of the Efficient Market Hypothesis (EMH) suggests that all publicly
available information is reflected in the current market prices of assets. However, it doesn't account
for private information, which is information not available to the general public. If an investor
possesses such private information that allows them to make better investment decisions, they may
be able to earn extraordinary returns, even in a market that is largely efficient according to the
semi-strong form of EMH.

2. If stock prices move randomly, charting and technical analysis are useful investment tools.

 False. If stock prices move randomly, as in the case of the Random Walk Theory, then charting and
technical analysis wouldn't be reliably useful investment tools. Technical analysis relies on the
assumption that historical price movements can be used to predict future price movements.
However, if prices move randomly, there would be no consistent patterns or trends to analyze,
making technical analysis ineffective. Random movement suggests that future price changes are
unpredictable and not influenced by past price movements.

3. Markets can only be efficient if many competent analysts are performing fundamental analysis.

 False. The efficiency of markets, as proposed by the Efficient Market Hypothesis (EMH), is not
dependent on the number of analysts performing fundamental analysis. The EMH suggests that
markets efficiently incorporate all available information into asset prices, whether or not there are
many analysts performing fundamental analysis. While competent analysts may contribute to the
efficiency of markets by processing and disseminating information, the efficiency of markets is
primarily driven by the speed and effectiveness with which all available information is reflected in
asset prices, rather than the number of analysts.

4. Most firms tend to be more profitable and have higher stock values when the economy is strong.

 True. In general, most firms tend to perform better and have higher profitability and stock values
during periods of economic strength. A strong economy typically leads to increased consumer
spending, higher corporate earnings, and improved business conditions, all of which contribute to
higher profitability and stock prices for many companies. Conversely, during economic downturns,
firms may experience reduced consumer demand, lower revenues, and decreased profitability, which
can result in lower stock values. Therefore, there is a correlation between the strength of the
economy and the profitability and stock values of most firms.

5. The best time to buy stock is at the peak of an economic cycle.

 False. Buying stocks at the economic peak is risky. Prices might be inflated and a downturn could
follow, leading to losses. Instead, aim to buy undervalued stocks, which may happen during
economic weakness. This allows you to buy low regardless of the economic cycle.
6. The efficient market hypothesis means that trades can be executed quickly, easily, and inexpensively
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  False. The Efficient Market Hypothesis (EMH) doesn't directly relate to the ease, speed, or cost of
trade execution. It primarily focuses on the idea that asset prices reflect all available information,
making it difficult for investors to consistently outperform the market. Trade execution factors like
liquidity and transaction costs are separate considerations.

7. Even if the semi-strong form of the efficient market hypothesis is true, trading on illegal insider
information may lead to abnormal profits.

 True. The semi-strong form of the Efficient Market Hypothesis (EMH) posits that all publicly
available information is already reflected in asset prices. However, it doesn't account for private or
illegal insider information, which isn't available to the general public. Trading on such illegal
insider information may indeed lead to abnormal profits because it provides an unfair advantage
over other market participants who do not have access to that information. Nevertheless, trading on
insider information is illegal and unethical, and individuals caught engaging in such practices can
face severe legal consequences.

8. In response to the same external force, the return on one investment may increase while the return on
another investment may decrease.

 True. Different investments can react differently to the same external force due to various factors
such as industry dynamics, company-specific characteristics, market sentiment, and investor
expectations. For example, changes in interest rates can affect different sectors of the economy in
distinct ways. While rising interest rates may benefit financial companies by increasing their net
interest margins, it could adversely affect interest-rate-sensitive sectors like real estate investment
trusts (REITs) or utilities. Therefore, it's entirely plausible for the return on one investment to
increase while the return on another investment decreases in response to the same external force.

9. Investors can be confidently predict future returns on an investment by studying its past
performance.

 False. Past performance is not a reliable indicator of future returns. While analyzing historical data
can provide insights into how an investment has performed under certain conditions, it does not
guarantee similar outcomes in the future. Market conditions, economic factors, and other variables
are constantly changing, making it challenging to predict future returns solely based on past
performance. It's essential for investors to consider a variety of factors, including fundamentals,
market trends, and risk factors, when making investment decisions.

10. Portfolio objectives should be established independently of tax considerations.

 False. Tax considerations can significantly impact portfolio performance and should be taken into
account when establishing portfolio objectives. Different investment strategies and asset allocations
can have varying tax implications, such as capital gains taxes, dividend taxes, and tax-deferred
growth opportunities. Investors should consider their tax situation, investment goals, and risk
tolerance when designing their portfolio to ensure it aligns with their overall financial objectives
while optimizing tax efficiency.

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 11. An efficient portfolio maximizes the rate of return without consideration of risk.

 False. An efficient portfolio seeks to achieve the highest possible rate of return for a given level of
risk or to minimize risk for a given level of return. This concept is often illustrated by the efficient
frontier, which represents the set of optimal portfolios that offer the highest expected return for a
given level of risk or the lowest risk for a given level of return. Therefore, an efficient portfolio
considers both risk and return, aiming to strike an optimal balance between the two.

12. A beta of 0.5 means that a stock is half as risky the overall market.

 True. A beta of 0.5 indicates that a stock is theoretically half as volatile or risky as the overall
market. Beta measures the sensitivity of a stock's returns to changes in the market returns. A beta of
1 implies that the stock's returns move in line with the market, while a beta greater than 1 suggests
higher volatility compared to the market, and a beta less than 1 suggests lower volatility compared
to the market. So, a beta of 0.5 indicates lower volatility than the market average.