Markets tend to be efficient when Multiple Choice arbitrage is unlawful. amateurs dominate the market. all investors are required to be rational. professional arbitrage exceeds amateur speculation. prices adjust to new information slowly.

Markets tend to be efficient when Multiple Choice arbitrage is unlawful. amateurs dominate the market. all investors are required to be rational. professional arbitrage exceeds amateur speculation. prices adjust to new information slowly.

Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter1: Ethics Expectations

Section: Chapter Questions

Problem 10.9EC

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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

Markets tend to be efficlent when
Multiple Choice
arbitrage is unlawful.
amateurs dominate the market.
all investors are required to be rational.
professional arbitrage exceeds amateur speculation,
prices adjust to new information slowly.

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The efficient market hypothesis says that Multiple Choice market prices reflect underlying asset values. individual investors should not participate in the financial markets. investors should expect to earn abnormal profits. financial managers can accurately time stock and bond sales. creative accounting can be used to inflate stock prices.
Which of the following is FALSE about the semi-strong form of market efficiency? All publicly available information is reflected in stock prices Fundamental analysis can help investors to outperform the market Technical analysis cannot be used to outperform the market Only private information can help investors to outperform the market
Which of the following statements are NOT problems a typical large investor faces? In order to complete large transactions, they may need to accept higher transaction costs or slower time until completion. If large investors want to trade large amounts of stock without affecting the stock price and while remaining anonymous, they may use a dark pool. If they make a large transaction, they may not receive the best price for those financial securities. Large investors trades are usually executed significantly slower than small investors trades.
It is said that market mispricing creates arbitrage opportunities. The other side of the coin is that the actions of arbitrageurs contribute to the removal of mispricing. How do you reconcile these seemingly contrary arguments?
Which of the following statements is incorrect? Select one: A. It is possible for markets to be efficient with respect to some information and inefficient with respect to other information B. It is possible for some markets to be more efficient than others C. The market is likely to be more efficient with respect to companies where there is greater analyst following D. The market is totally efficient with respect to companies providing regular dividends to investors
Question 1- Markets can never be strong-form efficient because: a. There are too many traders in them. b. Investors are rational. c. Information is costly to acquire. d. All information is public.
An efficient market is one in which no one can profit from having a better information than the rest. Is the statement true or false or uncertain
Which of the following statements regarding the professional arbitrage is FALSE? a) The arbitrageurs may choose to hold cash even when they know the asset prices are temporarily below their fair values. b) The arbitrageurs may lose money sometimes. c) The arbitrageurs conduct fire sales sometimes because the asset prices are too high. d) The arbitrageurs may make the markets less efficient sometimes.
Based on the empirical evidence pertaining to efficient markets, which of the following is most likely to earn abnormal returns? A technical analyst. A securities analyst. A company insider. A passive investor using index funds. Closed End investment companies. Open End investment companies or mutual funds.
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.
Which of the following is inconsistent or unrelated with the efficient market hypothesis? a. Changes in stock prices are impossible to predict from public information. b. Asset prices reflect all publicly available information about the value of the assets. c. Stock prices follow a random walk, so stock price movements should be impossible to predict. d. The stock market moves based on the changing animal spirits of investors. e. The stock market is informationally efficient. f. It is impossible to systematically beat the market
An efficient market is one in which no one ever profits from having better information than the rest. Discuss this statement and whether or not you find this to be true, false or are you uncertain. Why?