According to the efficient market hypothesis, the way to get a good return in the stock market is to: do your research on different stocks before buying buy a portfolio of stocks and hold over time listen to and read the news and follow up on stock tips hire a portfolio manager who can give you insider tips

According to the efficient market hypothesis, the way to get a good return in the stock market is to: do your research on different stocks before buying buy a portfolio of stocks and hold over time listen to and read the news and follow up on stock tips hire a portfolio manager who can give you insider tips

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter27: Investment, The Capital Market, And The Wealth Of Nations

Section: Chapter Questions

Problem 6CQ

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Similar questions

According to the efficient markets hypothesis,a. excessive diversification can reduce an investor’sexpected portfolio returns.b. changes in stock prices are impossible to predictfrom public information.c. actively managed mutual funds should generatehigher returns than index funds.d. the stock market moves based on the changinganimal spirits of investors
“If stock prices did not follow a random walk, therewould be unexploited profit opportunities in themarket.” Is this statement true, false, or uncertain?Explain your answer.
which one is correct? According to the semistrong-form efficient market hypothesis, which of the following types of information are fully reflected in stock prices? a. dividend and earnings announcements b. earnings announcements and rates of return c. rates of return, trading volume, and news about the economy d. All of these are correct. e. rates of return, trading volume, and block trades
What is the difference if any between an individual gambling at a casino and gambling by buying a stock? What is the difference for society? For an individual, gambling at a casino or by buying a stock A. is the same because they have the same expected values. B. is the same insofar that both involve uncertain outcomes C. different because the expected value of gambling in a casino is higher. 2. For society, gambling at a casino or by buying a stock A. is the same because neither redistribute income. B. is different because buying a stock more directly provides capital for companies to make productive investments. C. is the same because both have no effect on the budget deficit.
Why may different analysts arrive at different intrinsicvalues for the same stock?
Fortune magazine regularly publishes a list of the “most respected” companies. According to the efficient markets hypothesis, if you restrict your stock portfolio to these companies, will you earn a better-than-average return? Explain.
Suppose you expect a stock to pay a dividend of $10 every year forever and the discount rate is fixed at 5%. What would expect the price of that stock to be? What happens to the price of the stock if the discount rate falls to 2%? (Note: this exercise might help explain why the stock market is so high these days, despite the COVID-19 pandemic and lackluster economy.)
Suppose you expect a stock to pay a dividend of $10 every year forever and the discount rate is fixed at 5%. (a) What would you expect the price of the stock to be if it were priced according to its present value? (b) What happens to the price of the stock if the discount rate falls to 2%? (c) Now suppose you expect the dividend to grow by 1.5% every year, such that it will be $10.15 next vear. $10.30 the year after that, and so on. What are the new prices of the stock with 5% and 2% discount rates?
Which of the following is a reason why an investor would place a stop buy order on a stock? To ensure a short position is closed out for profit To ensure that the broker executes immediately at the current market price To ensure the stock is sold before its price falls to a specified level To ensure the stock is purchased when its price is rising
470 3 Which of the following is a reason (s) that US investors should consider foreign markets when constructing global portfolios? a. ignoring foreign markets reduced their choices of investment opportunities b. foreign markets have low correlations with us markets. c. returns on non US stocks can substantially exceed returns for us securities d. all of the above e. none of the above
Assume the following information about the market and JumpMaster's stock. JumpMaster's beta = 1.50, the risk free rate 2%, the market risk premium is 10.0%. Using CAPM, what is the expected return for JumpMaster's stock?
Define the term Expected return on a risky asset?