Chapter 13, Problem 5PS

Market efficiency How would you respond to the following comments?

1. a. “Efficient market, my eye! I know lots of investors who do crazy things.”
2. b. “Efficient market? Balderdash! I know at least a dozen people who have made a bundle in the stock market.”
3. c. “The trouble with the efficient-market theory is that it ignores investors’ psychology.”
4. d. “Despite all the limitations, the best guide to a company’s value is its written-down book value. It is much more stable than market value, which depends on temporary fashions.”