Answered: neffective in weak-from market…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter4: Profitability Analysis

Section: Chapter Questions

Problem 2BDIC

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Question

28-

Evidence on researching public information to identify mispriced companies shows that it is _______.

Group of answer choices

effective in earning abnormal returns in different market conditions

effective as long as the market is semi-strong form efficient

ineffective in weak-from market efficient

ineffective as long as the market is semi-strong form efficient
31-

Based on the information in the table which of statements about total risk is correct?

Stock	Standard Deviation	Beta
W	37%	1.00
X	35%	1.50
Y	30%	0.85
Z	45%	1.30

Group of answer choices

Stock Z has the greatest total risk because it has the largest standard deviation.

Stock X has the greatest total risk because it has the largest beta.

Stock W because it has the greatest diversifiable risk.

Stock Y has the lowest total risk because it has the lowest beta.

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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neffective in weak-from market efficient ineffective as long as the market is semi-strong form efficient 31- Based on the information in the table which of statements about total risk is correct? Stock Standard Deviation Beta W 37% 1.00 X 35% 1.50 Y 30% 0.85 Z 45% 1.30