Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 27, Problem 7QR
To determine
Efficient market hypothesis.
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The concept of market efficiency applies only in the financial market.
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Discuss the concept of duality in economics, where concepts like risk and return represent dual aspects of investment decisions. Provide examples from financial markets.
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Principles of Economics, 7th Edition (MindTap Course List)
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- Fama (1991) expanded the weak form of market efficient market hypothesis to include predicting future returns with the use of accounting or macroeconomic variables.Discuss.arrow_forwardFinancial markets are quintessential examples of perfectly competitive markets. determine how financial markets contribute to productive and allocative efficiency in the U.S. economy.arrow_forwardClearly explain the nature of the efficient markets hypothesis (EMH) and clearly distinguish between weak form, semi-strong form, and strong form efficiency. In your answer you should discuss the implications of the three forms of market efficiency for market practitioners.arrow_forward
- Which of the following would be considered as example of indirect finance?A. Abita borrowed $10,000 from his friend to finance his gaming business.B. Beancent invested his money in a famous mutual fund, which specialized in thetechnological industries.C. YNWA saves his money in bank.D. B & CE. All of the abovearrow_forwardWhich of the following would count as valid evidence against the efficient markets hypothesis? (a) Some investors make huge profits betting on specific stocks on the stock market. (b) Financial crises still occur. (c) Stock prices always rise two days after good news is released. (d) Stock prices are very volatile. (e) A company’s stock price does not always rise with good news about that company.arrow_forwardDemsetz argues that many market failure arguments are wrong because they ignore that real life is complicated. Pointing out that with uncertainty, the market doesn’t know the perfect amount to invest, does not mean that the government can better determine the perfect amount to invest. Apply Demsetz’s criticism of Public Interest Economics to the current debate about how much we should reduce the use of fossil fuels to prevent climate change. Please answer it correctly.arrow_forward
- Major energy companies have recently started moving their investments away from oil exploration due to the emergence of renewable energy as a credible alternative. Yet the government of Ghana has decided to borrow money to invest in oil exploration. Do you agree with the government’s decision? Explain your stance.arrow_forwardWhat effect might a fall in stock prices have on businessinvestment?arrow_forwardDiscuss the key divergent and convergent contributions to Efficient Market Hypothesis from 1970 to date.arrow_forward
- When frequency, asset specificity and uncertainty rise, what happens to the cost of using the market?arrow_forwardThe demanders of funds participate in the financial market to earn profit. *True or False??arrow_forwarddiscuss the notion of efficient markets when extended to international financial markets.arrow_forward
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