Which of the following does NOT correctly complete this sentence: In general, the link between an information announcement and the stock price is that Select one: O a. the stock price will not change if the announcement provided only anticipated information. O b. if markets are efficient in the semi-strong form, then the market will react rapidly to the new information. O c. the expected stock return will change if the announcement contains a surprise component. O d. in order for the price of the stock to change, the announcement must be relevant to that particular stock and must be unanticipated. O e. only announcements that have already been discounted will affect the stock price.

Which of the following does NOT correctly complete this sentence: In general, the link between an information announcement and the stock price is that Select one: O a. the stock price will not change if the announcement provided only anticipated information. O b. if markets are efficient in the semi-strong form, then the market will react rapidly to the new information. O c. the expected stock return will change if the announcement contains a surprise component. O d. in order for the price of the stock to change, the announcement must be relevant to that particular stock and must be unanticipated. O e. only announcements that have already been discounted will affect the stock price.

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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2. Stock prices and stand-alone risk Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk-free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability in an investment's possible returns, occurs when there is uncertainty about an investment's future outcome, such as the return expected to be generated by the investment and realized by an investor. Generally, investors would prefer to invest in assets that have: O A higher-than-average expected rate of return given the perceived risk O A lower-than-average expected rate of return given the perceived risk Read the following descriptions and identify the type of risk or term being described: Description This type of risk relates to the possibility that a firm will not be able to service its…
Which of the following is INCORRECT? A. Anticipated returns on any given stock are always greater than 0. B. A negative beta stock has an expected return less than the risk-free rate. C. Two assets with a correlation of -1 could be combined to create a portfolio with a standard deviation of zero (no risk). D. All a stock’s risk could be unsystematic.
for your explaination on the second one, i think you mean the answer is B. as you stated it will result into decrease of expected return if stock
II. Determine what form of the theory of efficient market is being described in each item. Write W for weak form, SE for semi-strong form, ST_ for strong form. _7. The fundamental analysis will not give new information in this form. 8. Both the fundamental and technical analysis will not give new information. 9. The stock pricess show historical information which may or may not include inside information. _10. The stodk prices already reflect all publicly available date such as any product, financial statement, etc.
Which of the following is NOT a potential problem when estimating and using betas, i.e., which statement is FALSE? a. Sometimes, during a period when the company is undergoing a change such as toward more leverage or riskier assets, the calculated beta will be drastically different from the "true" or "expected future" beta. b. The beta of an "average stock," or "the market," can change over time, sometimes drastically. c. Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed. d. All of the statements above are true. e. The fact that a security or project may not have a past history that can be used as the basis for calculating beta.
Momentum has been reported in stock returns in many world stock markets. Existence of momentum: leads to abnormal return if weak form efficient market is accurate. contradicts weak form of EMH. contradicts semi-strong form of EMH. leads to normal return if weak form efficient market is not accurate. All of the above answers are correct.
You believe you have found a trading strategy that could make significant profits. It requires looking at analyst forecasts and purchasing stock where therehas been an upgrade in the recommendation and selling shares where there has been a downgrade in the recommendation.a. Describe which form the Efficient Market Hypothesis will be viola ed if you are able to make significant profits from your trading strategy in the future.b. List three factors that you may be overlooking in assessing the profitability of your trading strategy.
Which of the following statements concerning the Efficient Market Hypothesis is correct? Select one: a. Stock market prices are based on speculation not on underlying information b. New information that confirms investor expectations should change stock prices c. Stock prices should slowly respond when unexpected information becomes available d. Careful research can help investors earn abnormal profits e. Your return on investment should reflect the riskiness of your portfolio
This is a general question and no specific numbers are required: You have two stocks and you have calculated the return on the relevant riskless assets for this market. What would the reasons be for choosing one asset over the other and explain why?
an investment market, understanding the concept of undervalued and overvalued stocks is very important. Hence, a prudent investor must have good knowledge about Beta, Market Rate of Return and Risk Free Rate of Return. Give a graphical example to present the positioning of:Market rate of return
You buy a stock from the capital market. If the capital market is semi-strong efficient, which of the following statements is NOT correct? a. You cannot earn any abnormal returns above the required return by trading on public information. b. Past stock prices can be used to predict future stock prices. c. The technical analysis of publicly available information will not lead to any abnormal returns. d. The stock is fairly priced. e. Stock prices reflect all publicly available information.
In the event of unexpected news announcement, such as a significant reduction in profit expectations, which of the following is NOT a likely stock price reaction?: Select one: a. The price instantaneously adjusts to the new information. b. No reaction, since the market has already learned to "expect the unexpected" The price over-adjusts to the new information, but eventually falls to the appropriate price. d. The price partially adjusts to the new information.

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