Which one of the following statements is true? Market crashes tend to be accompanied by low market volume. The Asian market crash was followed by a quick recovery. O The market crashes of 1929 and 1987 are very similar in both the percentage decline in market value and in the ensuing market recovery. Market crashes tend to follow market bubbles. Market bubbles and crashes prove that financial markets are inefficient.

Which one of the following statements is true? Market crashes tend to be accompanied by low market volume. The Asian market crash was followed by a quick recovery. O The market crashes of 1929 and 1987 are very similar in both the percentage decline in market value and in the ensuing market recovery. Market crashes tend to follow market bubbles. Market bubbles and crashes prove that financial markets are inefficient.

Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter8: Subprime Lending Fiasco-ethics Issues

Section: Chapter Questions

Problem 5.1EC

See similar textbooks

Related questions

Q: re are claims that the central bank caused the recession, and due to them, production has dropped…

A: Central bank are very important in the country and role of central banks have become major factor in…

Q: Which of the following sources of market inefficiency would be most easily exploited?a. A stock…

A: Market inefficiency refers to the deficiency of the market to absorb information and represent it in…

Q: Suppose company Z is already in financial distress and the equity holders are very close to default.…

A: The debt value and equity value of the company has increase or decrease as per the risk and the…

Q: Suppose that as the economy moves through a business cycle, risk premiums also change. For example,…

A: Efficient market hypothesis explains that the prices of the securities reflect all the information…

Q: True or False: The efficient markets hypothesis holds only if all investors are rational. False…

A: The efficient markets hypothesis holds only if all investors are rational. Answer:- True; Because in…

Q: Evidence of market inefficiency occurs when investors earn abnormal returns: Only in the short…

A: A Market is regarded as inefficient if: Intrinsic Value of stock is not equal to Market price of…

Q: The concept that market forces in the macroeconomy can remedy a recession is referred to as:…

A: Monetary Policy- Monetary policy refers to the actions and communications of the central bank in…

Q: “Financial intermediaries play a crucial role in an economic crisis–they are responsible for both…

A: A financial intermediary is a middlemen between a financial transaction. Examples of financial…

Q: Which of the following statements is false? A. Credit spreads narrow during an economic…

A: Credit Spread is the difference between the yield of the bonds with similar maturity but having…

Q: financial intermediaries play a crucial role in an economic crisis-they are responsible for both…

A: Financial intermediaries: Financial intermediaries are organization which are acts as a link between…

Q: Given the following anomalies, which is inconsistent with weak-form market efficiency?…

A: Days of the week effect is a market anomaly which will be reflecting that market will be providing…

Q: How does a deterioration in balance sheets of financialinstitutions and the simultaneous failures of…

Q: Due to an unexpected pandemic, the uncertainty levels have gone up tremendously in the financial…

A: Market value ratio is calculated by dividing market price to book value of shares.

Q: Political stability is a major factor of which one of the following? business risk inflation risk…

A: "Hi, Thanks for the Question. Since you asked multiple questions, we will answer first question for…

Q: The asymmetric information problems that act as a barrier to efficient allocation of capital is…

A: Introduction: Dynamics of financial crisis: The explanation of financial crisis are as follows…

Q: Financial Crises have Adverse effects on the Economies. Write a Comprehensive Note on the causes and…

A: Financial crisis is defined as wide variety of the situation, which has the financial assets by…

Q: Factors in financial crises include : a. The existence of hedge funds and tax havens b. A stock…

A: A financial crisis is a situation in which the financial assets in the economy lose their values and…

Q: Often, more than one kind of shock hits the economy at once. When this happens, the different shocks…

A: Question) A nation’s scientists invent many new Internet search tools, raising current productivity…

Q: M-1 when the economy is expanding than when it is experiencing a recession. Do you agree or…

A: The money multiplier will depend on the proportion of reserves that banks are required to hold by…

Q: Recession, inflation, and high interest rates are economic events that are best characterized as…

A: The question is asking us to identify the best characterization of recession, inflation, and high…

Q: Which of the following is not a factor that can provide financial instability? a. Decreases in…

A: Financial instability is a situation where there is a disruption in your financial system and when…

Q: Financial intermedires play a crucial role in an economic crisis they are responbile for both…

A: Financial intermediaries are the middle person between the financial market and the investors. They…

Q: Do you think investors can earn abnormal returns in financial markets that are at least semi…

A: Semi strong efficiency is a situation where all the public information about the stock prices is…

Q: We know that the market should respond positively to good news and that good-news events such as the…

A: According to efficient market hypothesis, stock prices reflect all the information known to the…

Q: One approach for using multifactor models is to use factors that capture systematic risk. Which of…

A: In the multiple factor model many various types of factors that will have an impact on the asset…

Q: Which of the following statements best describes financial markets? Answer a. Financial markets are…

A: A financial market is a market in which people exchange financial securities, derivatives, stocks…

Concept explainers

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

Question

Which one of the following statements is true?
Market crashes tend to be accompanied by low market volume.
The Asian market crash was followed by a quick recovery.
The market crashes of 1929 and 1987 are very similar in both the
percentage decline in market value and in the ensuing market recovery.
Market crashes tend to follow market bubbles.
Market bubbles and crashes prove that financial markets are inefficient.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Which of the following statements is false? A. Credit spreads narrow during an economic recession. B. Credit spreads tend to narrow as broker-dealers become more willing to provide capital. C. Less creditworthy issuers are subject to high market liquidity risk. D. None of the above.
Which of the following sources of market inefficiency would be most easily exploited?a. A stock price drops suddenly due to a large sale by an institution.b. A stock is overpriced because traders are restricted from short sales.c. Stocks are overvalued because investors are exuberant over increased productivity in the economy.
There are claims that the central bank caused the recession, and due to them, production has dropped below the optimum level, and inflation has gone up. What would you say to defend the central bank? Explain in detail.
Due to an unexpected pandemic, the uncertainty levels have gone up tremendously in the financial markets. Among other things, this increased uncertainty would cause the market value ratios to increase. Group of answer choices True False
The concept that market forces in the macroeconomy can remedy a recession is referred to as: Keynesianism: the use of expansive fiscal and monetary policies to resolve a recession. The self-correcting mechanism The consumption function The paradox of thrift
Given the following anomalies, which is inconsistent with weak-form market efficiency? Day-of-the-week effect. Value effect. Earnings surprise. Stock split effect. All of the above answers are inconsistent with weak-form market efficiency. None of the above answers is consistent with weak-form market efficiency.
Recession, inflation, and high interest rates are economic events that are best characterized as being a. company-specific risk factors that can be diversified away. b. among the factors that are responsible for market risk. c. risks that are beyond the control of investors and thus should not be considered by security analysts or portfolio managers. d. irrelevant except to governmental authorities like the Federal Reserve. e. systematic risk factors that can be diversified away.
One approach for using multifactor models is to use factors that capture systematic risk. Which of the following is not a common factor used in this approach? Market capitalization O Unexpected changes in real GDP O Unexpected changes in inflation Yield curve shifts Consumer confidence
Do you think investors can earn abnormal returns in financial markets that are at least semi strong-form efficient?
We know that the market should respond positively to good news and that good-news events such as the coming end of a recession can be predicted with at least some accuracy. Why, then, can we not predict that the market will go up as the economy recovers?
Suppose company Z is already in financial distress and the equity holders are very close to default. Suddenly there is a shock that causes an increase in the standard deviation of the return on company Z's assets. Which of the following correctly describes the new situation faced by company Z? A) Debt value will increase with the shock and equity holder are more likely to default. B) Equity value will increase with the shock and equity holder are less likely to default. C) Both Debt value and equity value will increase but the likelihood of default is unchanged. D) Both debt value and equity value will decrease and the likehood of default will increase.
Banks are more likely to create M-1 when the economy is expanding than when it is experiencing a recession. Do you agree or disagree? Why?