Which of the following is the correct definition of investment as per Graham? An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. An investment operation is one which, involves buying the highest quality of stocks. An investment operation is one which, involves buying stocks in the fastest growing businesses.

Which of the following is the correct definition of investment as per Graham? An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. An investment operation is one which, involves buying the highest quality of stocks. An investment operation is one which, involves buying stocks in the fastest growing businesses.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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some executive contend that they need to adopt a short-term orientation given the average holding period for stocks in professionally managed funds nowadays has dropped to less than one year. Thus, there is no need to consider the interest of long-term shareholders since there are none. comment on this reasoning.
Which of the following methods of picking stocks is not consistent with fundamental analysis? a. Relying upon the advice of Wall Street analysts b. Choosing mutual funds that are managed by individuals with good reputations c. Doing research such as thoroughly reading and analyzing companies' annual reports d. Viewing individual stock prices as unpredictable
Which of the following hypothetical phenomena would be either consistent with or a violation of the efficient market hypothesis? a. Nearly half of all professionally managed mutual funds are able to outperform the S&P 500 in a typical year. Consistent Inconsistent b. Money managers who outperform the market (on a risk-adjusted basis) in one year are likely to outperform the market in the following year. Consistent Inconsistent c. Stock prices tend to be predictably more volatile in January than in other months. Consistent Inconsistent d. Stock prices of companies that announce increased earnings in January tend to outperform the market in February. Consistent Inconsistent
In relation to the efficient markets hypothesis, consider the following observations: Mutual fund managers do not on average make superior returns. In any year approximately 50 percent of all pension funds outperform the market. It is possible to make superior returns by buying or selling stocks after the announcement of an abnormal rise in earnings. Managers who trade in their own stocks make superior returns. Which of the following statements is true? I does not provide evidence against semi-strongform efficiency, but II does provide evidence against semi-strong form efficiency. II does not provide evidence against semi-strongform efficiency, but I does provide evidence against semi-strong form efficiency. Both I and II provide evidence against the semi-strongform of market efficiency III provides evidence against semi-strong form efficiency and IV provides evidence against strongform efficiency. III and IV provide evidence against semi-strong form efficiency.
Which of the following hypothetical phenomena would be either consistent with or a violation of the efficient market hypothesis? Explain briefly.a. Nearly half of all professionally managed mutual funds are able to outperform the S&P 500 in a typical year.b. Money managers who outperform the market (on a risk-adjusted basis) in one year are likely to outperform the market in the following year.c. Stock prices tend to be predictably more volatile in January than in other months.d. Stock prices of companies that announce increased earnings in January tend to outperform the market in February.
A local mutual fund says it has expertise in identifying stocks that are undervalued because they are under researched or unpopular. To prove its point, the fund produces evidence that it returns over the past four years was 3% above the return on the market index. a) What does efficient market hypothesis (EMH) say about undervalued stock? b) Does the fund’s evidence contradict the EMH?
Which one of the following would provide evidence against the semistrong form of the efficient market theory?a. About 50% of pension funds outperform the market in any year.b. All investors have learned to exploit management signals about the future performance of the firm.c. Trend analysis is worthless in determining stock prices.d. Low P/E stocks tend to have positive abnormal returns over the long run.
Several celebrated investors and stock pickers have recorded huge returns on their investments over the past two decades. Is the success of these particular investors an invalidation of an efficient stock market? Explain.
Which one is correct answer please confirm? Studies analyzing the historical returns earned by common stock investors have found that the returns from average risk common stock investments over very long time periods have averaged approximately ____ percentage points ____ than holding period returns on corporate debt issues. a. 5.7; higher b. 5.7; lower c. 7.5; higher d. 7.5; lower
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