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What would happen to market efficiency if all investors attempted to follow a passive strategy?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 2DQ: What are the features of a perfectly competitive market? Give two examples of competitive markets....

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What are the features of a perfectly competitive market? Give two examples of competitive markets. How could a firm in such a market move to a less competitive market?
Why would an advocate of the efficient market hypothesis believe that even if many investors exhibit the behavioral biases, security prices might still be set efficiently?
What is weak-form EMH? What would you expect to see/not see if markets where weak form efficient? In other words, can you think of market events that would serve as evidence that market is or isn’t weak-form efficient?
If all investors believe that the market is efficient, could that eventually lead to less efficiency in the market? Explain with an example.
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Which of the following is not a characteristic of an efficient market? Investors can frequently make profits by predicting asset market prices that are different from intrinsic values. The market value of all securities at any one instant in time fully reflect all available information. Investors act rationally. The forces of demand and supply work to maintain that the security's market price and its intrinsic value are in equilibrium.
Which of the following statements about the Efficient Market Hypothesis (EMH) is incorrect? Group of answer choices a)If the market is strong-form efficient, investors can not earn abnormal returns using inside information. b) If the investment in small firms earns a positive abnormal return, the stock market is not semi-strong form efficient. c) If a market is efficient, investors tend to follow a passive investment strategy. d) If the future stock price change depends on its history, the market is not weak-form efficient. e) If a market is weak-form efficient, fundamental analysis can not earn a positive abnormal return.
Examine the weak, semi strong and the strong form if market efficiency, examine the various ways to test the different forms of market efficiency?
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If markets are efficient, how is it possible that market bubbles and crashes occur?
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A. Is selling a put option the same as buying a call option? Explain your answer. B. What is a market portfolio? How is it related to the concept of diversification? Would an investor who dislikes risk prefer investing in the market portfolio or a single firm´s stocks? C. What is a production bottleneck? How can a production bottleneck be identified using the simplex method (explain verbally). D. Which of the following pairs of firms sell competing products? Justify your answer. (You can use the internet to find out what each of these firms does.) (i) NorgesGruppen and Bunnpris (ii) NorgesGruppen and DNB (iii) NorgesGruppen and Equinor (iv) NorgesGruppen and McDonalds (v) NorgesGruppen and Orkla (vi) NorgesGruppen and Salma