Which of the following statements is FALSE? When a buyer seeks to buy a stock, the willingness of other parties to sell the same stock suggests that they value the stock differently. When private information is relegated to the hands of a relatively small number of investors, these investors may be able to profit by trading on their information. Since stock markets aggregate the information and views of many different investors, we expect the stock price to react quickly to new publicly available information as the investors continue to trade until a consensus is reached as to the new value of the stock. If the profit opportunities from having private expertise are large, other individuals will attempt to gain the expertise and devote at least as large amount of resources needed to acquire it.

Which of the following statements is FALSE? When a buyer seeks to buy a stock, the willingness of other parties to sell the same stock suggests that they value the stock differently. When private information is relegated to the hands of a relatively small number of investors, these investors may be able to profit by trading on their information. Since stock markets aggregate the information and views of many different investors, we expect the stock price to react quickly to new publicly available information as the investors continue to trade until a consensus is reached as to the new value of the stock. If the profit opportunities from having private expertise are large, other individuals will attempt to gain the expertise and devote at least as large amount of resources needed to acquire it.

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

Yinzhou is an investment adviser of CBMC Fresno Inc., and one of his client intends to invest in a stock that plots below the security market line (SML). What would be the appropriate recommendation? O Invest; The expected return is high relative to the risk. O Don't invest; The risk is high relative to the expected return. O Invest; All stocks revert to the SML over time. O Don't invest; All stocks below the SML are low-growth stocks.
Which of the following statements is NOT true about Initial Public Offerings? A. An IPO occurs when a private company sells stock to the public for the first timeB. IPOs are less risky than a typical stock market investment since they are typically smaller companiesC. When an IPO occurs, a company raises money from public investors that they use to grow their businessD. IPOs are risky investments since the company going public often has a limited track record of performance
Stock prices in an inefficient market tend to adjust faster to the new public information. Select one: OTrue O False
The efficient market hypothesis says that Multiple Choice market prices reflect underlying asset values. individual investors should not participate in the financial markets. investors should expect to earn abnormal profits. financial managers can accurately time stock and bond sales. creative accounting can be used to inflate stock prices.
Given that higher-risk investments, such as small-company stocks, have outperformed other investments over time, why don’t all investors choose to invest only in these high-risk securities? (Answer the question correctly and in-depth.)
Statement 1: Fundamental analysis believe that the historical performance of the stocks and markets areindications of future performanceStatement 2: Fundamental analysis works best in determining market sentiment and factor in the creation ofinvestment or trading decisionsStatement 3: Fundamental analysis will succeed if the analyst finds overlooked data in identifying undervaluedsecuritiesStatement 4: Fundamental analysis works best if all investors are logical and could separate emotions frominvestment decision.Statement 5: Fundamental analysis use charts and patterns that can suggest future activity and to measure asecurity’s intrinsic value.a. Only statements 1 and 3 are correct b. Only statements 2 and 4 are correct c. Only statements 1 and 2 are correct d. Only statements 3 and 4 are correct
A friend of yours owns a company that is about to get a large government contract. He tells you this inside information about the contract and also mentions that it should make the company's stock price increase dramatically. If you invest based on this inside information, then you are implicitly saying that stock markets are inefficient in which context? Question 5 options: weak form efficient market theory semi-strong form efficient market theory strong form efficient market theory
An investment banker most commonly makes money from Group of answer choices A. commissions from buyers. B. artificially supporting the stock price during and after the offering. C. fees from other investment bankers in the syndicate. D. the spread between the issue price and proceeds to the issuer.
Stock brokers must think in k-levels because: They don’t know what companies are really up to. They don’t know what the future will bring. Their valuation of a company depends on uncertainty at the firm level. Their valuation of a company depends on how others value that company.
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
Which of the following statements is true? Group of answer choices a. Dividend payments are attractive to executives who hold many executive stock options that were awarded to them by their firms b.Executives and other insiders benefit most by being able to tender their shares in an open market repurchase since they usually are privy to information that is not available to the general public c.Empirical research suggests that small, retail investors prefer stock repurchases to dividend payments d. a firm does not pay dividends, some institutional investors are prohibited from investing it the firmʹs equity
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

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