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5. If stock prices follow a random walk, their prices bear no relation to the company's real activities. True/False?
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- What does it mean to say “stock prices are nonstationary”?If most participants in the stock market do not follow what is happening to monetary aggregates, prices of common stock will not fully reflect information about them. Is this statement true? Explain your answerA good part of a company's future prospects are predictable. Given this fact, stock prices can't possibly follow a random walk.
- Assumes stock markets are both deep (many buyers and sellers) and liquid (easy to buy or sell). As soon as new information becomes available about a company, the supply and/or demand for its stock are not immediately affected. The first and second statements are both false. The first statement is false. The second statement is true. The first and second statements are both true. The first statement is true. The second statement is false.The small firm effect refers to the observed tendency for stock prices to behave in a manner that is contrary to normal expectations. Describe this effect and discuss whether it represents sufficient information to conclude that the stock market does not operate efficiently. In formulating your response, consider: (a) what it means for the stock market to be inefficient, and (b) what role the measurement of risk plays in your conclusions about each effect.“When the stock market declines the net worth of companies decreases, causing the problem of asymmetric information to decrease as well.” Is this statement true, false, or uncertain? Explain your answer.
- 1) If you believe in the _______ form of the EMH, you believe that stock prices only reflect all information that can be derived by examining market trading data, such as the history of past stock prices, trading volume or short interest. A) semistrong B) strong C) weak D) All of the options are correct. E) None of the options are correct. Please justify your answer.Which of the following are consistent with the efficient market hypothesis? Check all that apply. Changes in stock prices can be accurately predicted by investors. At the market price, the number of people who believe the stock is overvalued exactly equals the number of people who think the stock is undervalued. A positive news release about a company will increase the value and stock price for that firm. Some investors cite the existence of anomalies—observations that do not fit the model—as evidence that stock markets are not efficient. Which of the following are such anomalies? Check all that apply. The best time to sell a stock is late on Wednesday or Friday, whereas the best time to buy a stock is late on Tuesday or Thursday. The movement of stock prices of companies over time is the same as the changes in their earnings. High returns to a stock in one period are associated with even higher returns in a later period. There is a…Which of the following statements is NOT true? A. Stock owners benefit from stock price increases B. Higher stock prices allow companies access to more capital C. Common stocks are not securities D. Stock prices tend to be very volatile
- How would you use these to evaluate whether or not a current stock price is perhaps to high (overpriced) or too low (underpriced).Which of the following is true? a. Beta of a stock cannot be negative b. SML is an acronym for Stock Market Line c. Holding multiple stocks from the same industry is meaningful diversification d. Undiversifiable risk is known as the systematic riskBased on the Signaling Theory, issuance of common stock is a negative sign. Do you agree or disagree?