Robert Shiller and Eugene Fama who were jointly awarded the Nobel Prize in Economics in 2013 for their work on asset prices strongly disagree on whether I. stocks can be over or under priced. II. investors are rational. III. asset bubbles exist. Multiple Choice Only II I, II, and III Only I I and II Only III
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Robert Shiller and Eugene Fama who were jointly awarded the Nobel Prize in Economics in 2013 for their work on asset prices strongly disagree on whether
I. stocks can be over or under priced.
II. investors are rational.
III. asset bubbles exist.
Multiple Choice
Only II
I, II, and III
Only I
I and II
Only III
Step by step
Solved in 3 steps
- Which of the following is NOT axioms of utility? A. Completennes B. Interdependence C. Continuity D. Innovation 2. What is the study of how investors react to certain ways to diversify a portfolio? A. Behavioral Finance B. Traditional Finance C. Utility Theory D. Trend Theory 3. What do you call an act and ways that are consistent with how the business world views moral principles and values? A. Ethical Behavior B. Organizational Factors C. Issues and Concerns D. Organizational BehaviorThe value of a portfolio to investors equals its expected return minus 35 times its variance. There is one stock in the economy. Rational investors believe that its expected return is 1. Irrational investors believe that its expected return is 1.8. All agree that the variance of the stock is 0.02. Graph on one graph the price of the stock as the number of shares go from 20 to 60 in three different circumstances: A: There are 260 investors, and all are rational. B: There are 260 investors. 200 are rational and 60 are irrational. Shorting is allowed. C: There are 260 investors. 200 are rational and 60 are irrational. Shorting is not allowed.When a company decides to sell its stock to the public for the first time, it hires the services of a broker or brokerage firm. True or False
- What is uninformed “noise” trading associated with? a. Negative autocorrelation in stock returns b. Temporary market impact c. Bid-ask bounce d. All of the above e. None of the aboveTrue or False: Increasing the number of stocks in a portfolio reduces firm-specific risk. TrueFalseConsider two stock portfolios. Portfolio A consists of 20 different stocks from firms in different industries. Portfolio B consists of four different stocks, also from firms in different industries. The return on Portfolio A is likely to be volatile than that of Portfolio B.Suppose a stock analyst recommends buying stock in the following companies:Company IndustryToyonda AutomotiveSaalvo AutomotiveGMW AutomotiveHonsubishi AutomotiveShexxon Oil and gasMobron Oil and gasAiring AircraftBoebus AircraftGoohoo TechnologyPherk PharmaceuticalEach of the following portfolios contains four of the stock picks. Which portfolio is the least diversified? Pherk, Airing, Goohoo, ShexxonToyonda, Honsubishi, Boebus, AiringToyonda, Saalvo, GMW, HonsubishiBoebus, Airing, Shexxon, MobronSelect all of the following that are true regarding hedging: A. Hedging is risk mitigation through diversification. B. Hedging is the same as arbitirage since it acts in across markets C. Hedging increases the returns of an investment D. Buying an risky investment is an example of hedging Detailedly Explanation Please, Thank you!
- The market risk premium is 8 percent and the risk-free rate is 5 percent. Which stock has the most systematic risk? Which one has the most unsystematic risk? Which stock is “riskier”? Explain.Rohan decides to invest in bonds instead of stocks because he has heard that bonds are a lower-risk investment. He uses the bond's credit rating to make his investment decisions. Which of the following is true about the risk Rohan faces with his decision? The bonds' value is not affected by inflation because most bonds pay a fixed coupon rate over time. The credit ratings of the bond-issuing companies will not change from one year to the next. The bond issuer may not pay him back because it may go bankrupt or become insolvent. If Rohan chooses bonds from a company with low credit ratings, he's almost certain to have low default risk.You have a bond that pays $125 per year in coupon payments. Which of the following would result in an increase in the price of your bond? A. Coupon payments on newly-issued bonds rise to $140 per year. B. The likelihood that the firm issuing your bond will default on debt increases. C. The price of a share of stock in the company falls. D. Coupon payments on newly-issued bonds fall to $75 per year
- Imprudential, Inc., has an unfunded pension liability of $414 million that must be paid in 19 years. To assess the value of the firm’s stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 7.9 percent, what is the present value of this liability?Sam is looking to purchase his first multi-family investment property. If you were Sam's agent, what risks about real estate would you explain to him? Real estate is an illiquid asset that cannot easily be sold. There are no risks associated with real estate investing. Real estate has historically been used as a tax shelter. Real estate appreciates in value.a) Explain the practical relevance of the mean-variance model of portfolio selection
