Discussion Question on Market Efficiency Consider the following statements from two different investors regarding their strategies for investment. Assuming the stock market is efficient, which investor has the best strategy? Be sure to fully explain your answer. Investor 1 My strategy is to find companies that are undervalued. Because they are undervalued, I representing the overall stock market. I do not expect these companies to experience a lot of growth. And I have been pretty successful at it. About 50% of the time, I am correct in choosing undervalued stock. Investor 2 My strategy is to invest in mutual fund believe I know that much more than all other investors, so the stock price we see in the market is probably a good indicator of the fundamental value of the stock. So there is no use in trying to find undervalued or overvalued stocks
Discussion Question on Market Efficiency Consider the following statements from two different investors regarding their strategies for investment. Assuming the stock market is efficient, which investor has the best strategy? Be sure to fully explain your answer. Investor 1 My strategy is to find companies that are undervalued. Because they are undervalued, I representing the overall stock market. I do not expect these companies to experience a lot of growth. And I have been pretty successful at it. About 50% of the time, I am correct in choosing undervalued stock. Investor 2 My strategy is to invest in mutual fund believe I know that much more than all other investors, so the stock price we see in the market is probably a good indicator of the fundamental value of the stock. So there is no use in trying to find undervalued or overvalued stocks
Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN:9781285867977
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter8: Risk And Rates Of Return
Section: Chapter Questions
Problem 7TCL
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