Why is it difficult to puncture a market bubble?

Q: Why are the following “effects” considered efficient market anomalies? Are there rational…

A: Portfolios of low price-earning (PIE) ratio have been shown to provide higher returns than high PIE…

Q: Carefully explain the Arbitrage Pricing Theory (APT). What is the main assumption the APT is built…

A: Market efficiency Market efficiency theory states that all information whether it is private or…

Q: What is an equivalent process of a money market hedge? Why?

A: Money market hedge A technique of utilizing the money market that has high liquidity, as well as…

Q: Discuss the argument that central banks should have a mandate for price  stability to prevent an…

A: The central bank is the banker's bank. It gives advice to the government Central bank assists in…

Q: How does the emergence of interest-rate risk helpexplain financial innovation?

A: Interest rate risk is defined as the risk that is faced by the bond holders because of the changing…

Q: Why should we try to control inflation or should we let the market take care of lowering price…

A: Inflation is a general increase in the price of goods and services over some period of time. It has…

Q: Summarize the reasons why behavioralfinance suggests thatthe efficient markethypothesis may nothold.

A: Introduction: Efficient market hypothesis claims that it is difficult to beat the market because…

Q: Does Arbitrage destabilize foreign exchange markets? Support your logic about that statement

A: Solution- F = S*1+if/1+id  F= Forward Exchange Rate  S= Current Spot Exchange Rate  Id= Interest…

Q: If markets are efficient, how is it possible that market bubbles and crashes occur?

A: An efficient market hypothesis is an approach to the financial market that states that the financial…

Q: Even if behavioral biases do not affect equilibrium asset prices, why might it still be important…

A: Answer: There exist two reasons why the behavioral biases do not impact equilibrium asset prices.…

Q: What does market equilibrium mean? If equilibrium does not exist, how will it be established?

A: Introduction: Market equilibrium is nothing but that the marginal investors assume all shares are…

Q: Discuss the problems of identifying speculative bubbles in markets

A: A speculative bubble is a sudden increase in the price of an asset, asset class, or industry due to…

Q: Does the efficient market hypothesis suggest that an investor can outperform the market? What effect…

A: Does the efficient market hypothesis suggest that an investor can outperform the market?  The…

Q: Why is the t-bill's return independent of the state of the economy? Do t-bills promise a completely…

A: Treasury bills (T-bills) are a kind of short-term debt that is issued by the government with the aim…

Q: If the efficient market hypothesis is true, what are the implications for the investors?

A: Efficient market hypothesis: Efficient market hypothesis assumes states that stocks are traded at a…

Q: Why is the T-bill’s return independent of the state of the economy? Do T-bills promise a completely…

A: Government also issues various securities in the market to arrange the funds and generally, these…

Q: What is meant by coupon stripping in the Treasury market?

A: Coupon stripping is the separation of an instant bond's periodic interest bills from its foremost…

Q: To what extent does investor mood explain price fluctuations? Explain

A: Investor:- A person or other entity (such as a company or mutual fund) who invests money in the…

Q: What will you do if your market does not develop as quickly as you predicted? What if your market…

A: There are four ways to predict the market- 1)-Momentum 2)-Mean Reversion 3)-Martingales 4)-The…

Q: How can we reduce o reduce the effect of market volatility on our holdings?

A: Market volatility is a term that describes the level of stock and bond market instability based on…

Q: What are the Momentum and Reversal Effects? How does the weak form of the ficient market hypothesis…

A: Momentum and reversal effects are very useful in the technical analysis in stock market prediction…

Q: Rigorously define the rather vague idea of ‘beating the market’ with reference to the Efficient…

A: Efficient Market Hypothesis -  Efficient Market Hypothesis implies that  share price reflect  all…

Q: Which form of market efficiency is the best among weak, semi strong and strong?

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Describe why it is difficult to manipulate security prices in a well-developed and liquid market.

A: Market manipulation is referred to as an act of artificial deflation or inflation of the security…

Q: Why the following effects are considered efficient market anomalies? Are there rational explanation…

A: Market anomalies are referred to a situation where the stock prices are not changed as per the…

Q: n efficient market hypothesis and what are anomalies in the efficient market hypothesis?

A: Efficient market hypothesis is hypothesis explain the pricing in the market of equity and market…

Q: How can the bursting of an asset-price bubble in thestock market help trigger a financial crisis?

A: Financial crisis refers to a situation when no one in the financial market is interested to lend…

Q: Why would you expect securitization to take place only in highly developed capital markets?

A: Firstly, we understand what is securitization, In simple word it is a process of liquidation of…

Q: Riskless, costless arbitrage is the cornerstone of the efficient market hypothesis. However,…

A: Unavoidable Risk: There may be some improbable but significant risks, such as the possibility that…

Q: at markets are free of arbitrage opportunities?

A: Arbitrage opportunities are a type of strategy in which an investor tries the same asset in…

Q: s it true that a market which is efficient in its semi-strong form is automatically efficient in its…

A: Market efficiency: It states that the market is efficient and that the investor cannot gain any…

Q: aving a trading system is important? And why managing our

A: Trading system is very important for growth and development of economy and growth of financial…

Q: What is an efficient market and why is it important for derivatives markets?

A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…

Q: If the market is efficient with respect to one information set i.e. either weak, semi-strong or…

A: Market efficiency refers to the reflection of the current prices of all the relevant information…

Q: Why do Eurobonds appeal to investors?

A: Euro bonds are the bonds that are issued in the Euro market. It comprises the bonds that are issued…