Which is NOT an IPO puzzle? Huge price spikes in the first couple trading days Underperformance in the long run Extreme IPO market cycles Hiring underwriters to do the job
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Which is NOT an IPO puzzle?
- Huge price spikes in the first couple trading days
- Underperformance in the long run
- Extreme IPO market cycles
- Hiring underwriters to do the job
IPO is the initial public offer which means whenever the company issues equity for the first time it is called IPO and is issued through primary market.
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- Which of the following is FALSE about IPO underpricing? a) The average underpricing in US IPOs is between 15-20% B) IPOs in Europe and the Americas on average exhibit less underpricing compared to IPOs in Asian and Pacific markets C) The underpricing, and the subsequent large returns on the first day of trading, helps the firm receive more money for the shares offered in the IPO. D) Average IPO underpricing in the US is around 17%.Assume that markets are semi-strong form efficient. Suppose, then, that during a trading day, important new information is released for the first time concerning a certain company. This information indicates that one of the firm's oil fields, previously thought to be very promising, just came up dry. How would you expect the price of a share of stock to react to this information?During the Facebook IPO the overall stock market was very volatile (S&P 500 index value fluctuated a lot). This was very beneficial to the valuation and price discovery process during the IPO. Group of answer choices True False
- There is a new IPO of firm whose value might be 50 or 100 with equal probability. A lot of investors know the value of the firm because they had access to the accounts but you do not. What would be your maximum bid in an auction IPO? a. 75 b. 0 c. 50 d. 100About market efficiency, which of the following statements is right:a. In a highly efficient stock market, it is almost impossible for an investor to make profit from the stock market.b. In a highly efficient stock market, some smart investors can definitely beat the market even without the inside information. c. An investor can make profit by buying the stock of free Inc. since it just reported that the half-year profit doubled with respect to that during the same period in the last year. d. The stock prices of big companies are closer to their intrinsic values than those of small companies since more people follow those big companies, whereas few people follow those small companies.Is it preferrable that if markets are price efficient, there is no “timing” possible on the stock issue and the company should issue the shares immediately regardless the “timing” instead of waiting for two more weeks, for instance, in order to get a better price?
- Stocks have a reasonable chance of keeping pace with inflation—but when it comes to doing so, not all equities are created equal. For example, high-dividend-paying stocks tend to get hammered like fixed-rate bonds in inflationary times. 12 Investors should focus on companies that can pass their rising input costs to customers, such as those in the consumer staples sector. Give typing answer with explanation and conclusionS. Bouchard and Company hired you as a consultant to help estimate its cost of common equity. You have obtained the following data: DO $0.85; PO $22.00; and g 6.00% (constant). The CEO thinks, however, that the stock price is temporanly depressed, and that it will soon rise to $34.00. Based on the DCF approach, by how much would the cost of common from retained earnings change if the stock price changes as the CEO expects?.Every morning, Bob Smith puts his stock pick of the week up on Yahoo! Finance for the world to see. Every week, Ben Graham seets it, waits a few hours and then buys the stock and it always goes up! This would appear to violate the: a) Weighted Average Cost of Capital b) Volitality Principal c) Capital Asset Pricing Model d) Efficient Market Hypothesis
- 13. XYZ Ltd.’s IPO was severely under-priced based on the first day’s closing price. How would it affect your thinking to know that at the time of the IPO, XYZ was only looking for gold and did not have any revenue from its operations?Which of the following is TRUE? a. A bull market is where stocks, on average, are expected to go up in the near future. b. A bull market is the primary market where IPO's are introduced. c. A bull market is a situation where the price of stock in that market has been rising over a fairly long period of time d. A bull market is a market where there are more buyers than sellers, there have been more purchases of stock than sales of stock and a lot of stock is traded every day.Efficient Market Hypothesis For each of the following scenarios, discuss whether profit opportunities exist from trading in the stock of the firm under the conditions that (1) the market is not weak form efficient, (2) the market is weak form but not semistrong form efficient, (3) the market is semistrong form but not strong form efficient, and (4) the market is strong form efficient. a. The stock price has risen steadily each day for the past 30 days.b. The financial statements for a company were released three days ago, and you believe you’ve uncovered some anomalies in the company’s inventory and cost control reporting techniques that are causing the firm’s true liquidity strength to be understated. c. You observe that the senior management of a company has been buying a lot of the company’s stock on the open market over the past week. Use the following information for the next two questions: Technical analysis is a controversial investment practice. Technical analysis covers a wide…
