The term 'random walk' is used in investments to refer to O A. stock price changes that are random but predictable O B. stock prices that respond slowly to both old and new information O C. stock price changes are independent of one another and unpredictable O D. stock price changes that follow the pattern of past price changes O E. stock price changes that are not efficient

The term 'random walk' is used in investments to refer to O A. stock price changes that are random but predictable O B. stock prices that respond slowly to both old and new information O C. stock price changes are independent of one another and unpredictable O D. stock price changes that follow the pattern of past price changes O E. stock price changes that are not efficient

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter31: Capital Markets

Section: Chapter Questions

Problem 8E

See similar textbooks

Similar questions

(FINANCIAL MARKET AND EXPECTATION) a. Name three independent variables that affect stock prices and explain how these independent variables affect stock prices. b. If the Government is conducting an expansionary monetary policy, how will it affect stock prices? Draw the IS LM curve. c. The number of online video viewers increases dramatically during this pandemic time. How would this tendency affect the stock price of online video companies? What variable of the stock price determination will be affected in this case?
“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.
1. During the second quarter of 2010 rumors about the health of the Greek economy created significant fluctuations in stock prices all over the world. Explain the effects of changes in stock prices on investment levels according to Tobin’s q theory. 2. A relatively recent trend in most developed countries, including the United States, is the creation of single person households. Discuss the short- and long-run consequences of this trend in housing prices and residential investment.
Stock Market Futures Market January KLSE composite index stands at 1162. Investor expects to purchase a RM10million stock portfolio in two months’ time Buys March KLSE CI contracts at 1158 March KLSE composite index has risen to 1171, making the acquisition costs of the shares more expensive. Sells March KLSE CI contracts at 1173 b. Assume that the investor wants to cover the full value of their expected investment. How many March KLSE CI futures contracts must they purchase? c. Calculate the profit/loss on the spot transaction. d. Calculate the profit/loss on the futures transaction. e. Is the hedging strategy efficient?
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?
2. The cash flows for an investment project are listed below. the firm will invest if the present value of the cash flows is positive. Year 1 −200 Year 2 100 Year 3 120 Should the firm undertake this project: a. If the interest rate is 5 percent? b. If the interest rate is 10 percent? 5. Given the following information, calculate tobin's q statistic: Let's suppose that a company has one million outstanding shares of stock, each valued at $25. Let us suppose also that the replacement cost of its physical capital stock is $18 million. a. Should this firm invest (net) in more physical capital?
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.)
Question A. How do individual companies respond to economic forces throughout the globe? One way to explore this is to see how well rates of return for stock of individual companies can be explained by stock market indexes thar reflect particular parts of the world. The table below shows monthly rates of return for two companies, Microsoft (headquartered in the United States) and China Telecom (in China), along with three indexes: the Hang Seng (Hong Kong), the FTSE 100 (London), and the S&P 500 (New York). 1. Which index most explains changes in Microsoft’s stock price? a. Run three separate regressions (one for each of the indexes) to assess the percentage changes in Microsoft stock explained by each of the three indexes. Report the adjusted r-square and p-value of the coefficient for each index. Which indexes, if any, are significant? b. Now run a single multivariate regression model with all three indexes included. Which indexes, if any, are now considered significant? Report…
Looking at the stock information in figure 2, what would you conclude about the South African MobilePhone sector between 2008 and 2011? A. The market was very depressed between the period 2008-2011 as cellular stocks remained below2008 prices through the period to 2011.B. The market was solid and prices were rising between 2008 and 2011C. Prices fell steadily but investors remained hopeful that the market was going to rebound in the nearto medium termD. The market crashed and plateaued between 2008 and 2011
A company has no preferred stock outstanding and has 15,000,000 common shares outstanding. The company’s Net income is $30,000,000 and it pays a total of $7,500,000 in common dividends. Currently the shares trade for $20 per share. For this company, what is: (Round your answer to two decimal places, if necessary) EPS? $ DPS? $ Dividend yield? % Dividend payout rate? % Retention rate? %
Which bonds are acceptable for investment? Justify your response with suitable computations. 2. What will be the total cost of investment in bonds? 3. Do the stock and bond investments fall within Stephanie’s investment guidelines? Show appropriate computations in support of your response.
You expect KT Industries (KTI) will have earnings per share of $4.6 this year and expect that they will pay out $1.66 of these earnings to shareholders in the form of a dividend. KTI's return on new investments is 11% and their equity cost of capital is 16%. KTI's dividend growth rate is _________ (Round to two decimal places) If KTI's dividend growth rate will remain constant, and KTI's next year dividend is $1.78, then KTI's current stock price should be ________ (Round to two decimal places)