JWing Is FALSE regarding the Efficient Market Hypothesis? ) In general, the Efficient Market Hypothesis says that stock prices very quickly reflect information that is available. If financial markets are weak form efficient, then technical analysts cannot make abnormally good returns, on average, by studying charts of past stock prices and trading volumes. If financial markets are strong form efficient, then insiders with private information about a company would not be able to make abnormally good returns by trading on that information. OThe Efficient Market Hypothesis implies that skilled fundamental analysts can make abnormally good returns by studying a firm's financial statements, suppliers, customers, and the economic conditions. O Evidence suggests that insiders who trade on private information can make abnormally good returns, but it's illegal to do so.

JWing Is FALSE regarding the Efficient Market Hypothesis? ) In general, the Efficient Market Hypothesis says that stock prices very quickly reflect information that is available. If financial markets are weak form efficient, then technical analysts cannot make abnormally good returns, on average, by studying charts of past stock prices and trading volumes. If financial markets are strong form efficient, then insiders with private information about a company would not be able to make abnormally good returns by trading on that information. OThe Efficient Market Hypothesis implies that skilled fundamental analysts can make abnormally good returns by studying a firm's financial statements, suppliers, customers, and the economic conditions. O Evidence suggests that insiders who trade on private information can make abnormally good returns, but it's illegal to do so.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Stock prices in an inefficient market tend to adjust faster to the new public information. Select one: OTrue O False
One reason that firms exist is that most investors are risk averse, so they are not willing to make the kinds of risky investments that firms typically undertake. O True O False
Which of the following statements is correct? A. Investors appreciate illiquid assets in their portfolios as they can easily sell them off to cover margin calls. B. Liquid assets can quickly be converted into cash without changing prices too much. O C. Corporate bonds are among the most liquid financial assets as they trade at a very high frequency. D. Liquid assets tend to be cheaper as investors are not willing to pay for their liquidity benefits.
A high level of financial leverage exposes firms to default risk. However, as a result of it, shareholders of the firm expect high potential returns. Select one: True False
If an insider cannot take advantage and trade on private information to make abnormal profits , then a market is likely to be considered: O A. Strong form efficient B. Weak form efficient and Semi strong form efficient only Oc. Only Semi Strong form efficient
A2) Which of the following statements is least accurate? A. The variance on a well-diversified portfolio is a function of systematic risk only. B. When market is inefficient or there is tax, shareholders' wealth is not affected by a company's choice between dividend and repurchase. C. Although dividend is taxable, there is a group of investors who prefer cash dividends over repurchase. D. Companies are reluctant to cut dividends as dividends tend to be sticky.
If the weakest form of market efficiency holds, then security prices reflect all information found in past prices and volume. Thus, traditional "technical analysis" will not work. Group of answer choices True False
Which of the following is NOT correct with respect to the Efficient Market Hypothesis? If markets are semi-strong form efficient, then fundamental analysts would not be able to earn abnormally good returns, after considering the risk they assume. O Semi-strong form efficiency says that if a company announces a labor strike, the stock price very quickly adjusts downward. Evidence suggests that markets are NOT strong form efficient, since insiders could make abnormally good returns trading on private information. However, that is illegal. () Semi-strong form efficiency says that when Stryker makes an earning announcement, the stock price quickly reflects the new information. )Weak form efficiency says that technical analysts who study charts of stock prices and volumes can regularly make abnormally good returns, after considering the risk the assume. Page 24 of 30
Beta calculations are subject to which of the following limitations? a. The market's rate of return varies from year to year. b. Beta is known to be erratic and unpredictable. c. Collecting rate of return data on individual assets is difficult. d. Beta is determined from historical data, and the stock's characteristics might have changed since hte measurement was performed.
2 D )When financial markets are semi-strong form efficient, then: Traders can earn exceptional profits using publicly available information. Stock analysts have a trading advantage because of their access to vast amounts of public information. Company insiders can profit based on the inside information. Individuals can identify mispriced stocks using publicly available information
As a financial manager, you found that capital market is very risky and volatile. As we know that the firm’s Beta (β) measures the volatility, or systematic risk, of a security, as it compares to the broader market. The higher the firm’s Beta, the higher the security’s risk, as it compares to the broader market. However, the shareholders of your firm heard about another firm with negative Beta, and they are confused now. The shareholders of your firm would like to know if a firm can have a negative beta. If yes, what would the expected return on such a firm be? Why? Please explain your reasoning by providing quality argument.
Do you think investors can earn abnormal returns in financial markets that are at least semi strong-form efficient?

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