Throughout the 1990s, the equity premium fell considerably especially in the USA. One conceivable reason for that change is a decrease in investors’ required rates of return. Explain carefully how and why a decline in the required rate of return affects stock values and returns.
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Throughout the 1990s, the equity premium fell considerably especially in the USA. One conceivable reason for that change is a decrease in investors’ required
Explain carefully how and why a decline in the required rate of return affects stock values and returns.
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- If above average returns during the late 90s were due to declining equity premiums, explain thoughtfully why investors expecting above-average returns in the future may be disappointed.Benjamin Graham, the father of value investing, once said, “In the short run, the market is a voting machine, but in the long run, the market is a weighing machine.” In this quote, Benjamin Graham was referring to the key difference between the “price” and the “value” of a security. In November 2006, Citigroup’s stock (NYSE: C) was trading at $49.59. Following the credit crisis of 2007–2008 and by the end of October 2009, Citigroup’s stock price had plummeted to $4.27. Several banks went under, and others saw their stock prices lose more than 60% of their value. Based on your understanding of stock prices and intrinsic values, which of the following statements is true? The intrinsic value of a stock is based only on perceived investor returns. A stock’s market price is often based on investors’ perceived risk in the company. You can estimate the value of a company’s stock using models such as the corporate valuation model and the dividend discount model.…The price-to-earnings ratio: ( al is of little value to investors these days due to the fact that market values far exceed camings values. b) is important to investors because a higher P/E ratio means lesser growth in earnings over time. C) develops an investor's knowledge of the price of various stocks in a single industry. d) is important to investors because a higher P/E ratio means greater growth in earnings over time.
- What comment or conclusion can be made about this? Large amounts of national debt can lead to higher interest rates and lower stock prices. Stocks are a reflection of investor confidence. If those investors lose confidence in where those companies operate then their stock price will take a hit.Which of the following is an example of unsystematic risk? XYZ corp stock price fell when the news of a drop in GDP was released. When the new employment numbers showed the economy is creating more jobs, the stock market rose. ABC Manufacturing stock price falls upon the announcement that they have a parts shortage from their suppliers When news of strong consumer demand was released, proctor and gamble stock price rose The stock market rose at the announcement of higher GDP numbersIf markets systematically overreact, then the best stocks to buy today are those stocks which have: a. Recently performed exceedingly well b. Recently performed poorly c. Not yet reacted to economic changes d. Moved sharply above its recent high price
- Investments in large-cap stocks have historically earned lower returns than small-cap stocks. This suggests that _____________________. Data on small-cap stocks was less accurate than for large-cap stocks. Small-cap stocks were riskier than large-cap stocks and offer higher returns in compensation Small-cap stocks had better management than large-cap stocks Government subsidies available to small firms produced a positive effect on small-cap returnsbased on the current variables that may impact stock demand, such as inflation, budget deficit, monetary policies, political situations, and investor's sentiment generally. Do you believe that stock prices will grow or drop this year's end based on these conditions? Justify your response using logic. Which of the following factors do you believe will have the greatest influence on stock prices?When considering a top-down approach to fundamental analysis, the impact of macroeconomic factors on a stock’s price can have which of the following effects? an increase in real GDP is followed by improvement in current and expected future profits for companies, leading to higher stock price. an increase in real GDP is followed by performance of industries and subsequent improvement in current and expected future profits for companies, leading to higher stock prices. an increase in real GDP, followed by a significant performance of cyclical industries such as automobile and consumer discretionary, will lead to higher stock prices.
- Why Meta stock soared recently despite earnings miss? Is it normal to observe that stock price immediately reflect any information about a stock? What does it tell you about how efficient the US equity market is?LinkedIn suffered a large drop in share value following an unexpectedly weak forecast of their future earnings. Why would this surprise cause investors to value LinkedIn lower?Empirical research on payout patterns in recent years indicates that Group of answer choices since 2000, firms are paying higher dividends and executing fewer stock repurchases after the Tech crash in March 2000, investors began to demand more dividends and firms obliged fewer firms are paying dividends since the Tech crash in March 2000 since 2000, firms are paying lower dividends and executing more stock repurchases