The value of an ordinary shareSelect one or more:a. Will fall if future profit forecasts are higher than expectedb. Is always at its fundamental valuec. Can rise and fall along with market sentimentd. Will rise if a firm introduces some cost saving innovation

Ordinary shares are mainly traded on the stock exchange, so the value of an ordinary share will rise…

The value of an ordinary share Select one or more: O a. Will fall if future profit forecasts are higher than expected O b. Is always at its fundamental value O c. Can rise and fall along with market sentiment O d. Will rise if a firm introduces some cost saving innovation

The value of an ordinary share Select one or more: O a. Will fall if future profit forecasts are higher than expected O b. Is always at its fundamental value O c. Can rise and fall along with market sentiment O d. Will rise if a firm introduces some cost saving innovation

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter5: Risk Analysis

Section: Chapter Questions

Problem 11QE: Market equity beta measures the covariability of a firms returns with all shares traded on the...

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The value of an ordinary share
Select one or more:
a. Will fall if future profit forecasts are higher than expected
b. Is always at its fundamental value
c. Can rise and fall along with market sentiment
d. Will rise if a firm introduces some cost saving innovation

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Market equity beta measures the covariability of a firms returns with all shares traded on the market (in excess of the risk-free interest rate). We refer to the degree of covariability as systematic risk. The market prices securities so that the expected returns should compensate the investor for the systematic risk of a particular stock. Stocks carrying a market equity beta of 1.20 should generate a higher return than stocks carrying a market equity beta of 0.90. Nonsystematic risk is any source of risk that does not affect the covariability of a firms returns with the market. Some writers refer to nonsystematic risk as firm-specific risk. Why is the characterization of nonsystematic risk as firm-specific risk a misnomer?
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