Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 8CTCR
Summary Introduction
To critically think about the statement: “Speculative trading in the stock market is gambling. The speculative investors’ trade for pleasure and it has no social value”.
Introduction:
Speculative trading refers to the trading of stock with the expectation that the prices will rise or fall in the future.
Gambling is the process of risking one’s money or financial asset with an uncertain expectation that the outcome will be favorable.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
What are some benefits of owning stocks? How can you mitigate the risk?
Day traders try to take advantage of the normal ebbs and flows of the market, seeking to buy stocks that are undervalued and sell them when they become overvalued. How does this compare to Warren Buffet’s investing strategy?
You buy a stock from the capital market. If the capital market is semi-strong efficient, which of the following statements is NOT correct?
a.
You cannot earn any abnormal returns above the required return by trading on public information.
b.
Past stock prices can be used to predict future stock prices.
c.
The technical analysis of publicly available information will not lead to any abnormal returns.
d.
The stock is fairly priced.
e.
Stock prices reflect all publicly available information.
Chapter 10 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 10.1 - Prob. 10.1ACQCh. 10.1 - Why are unrealized capital gains or losses...Ch. 10.1 - What is the difference between a dollar return and...Ch. 10.2 - Prob. 10.2ACQCh. 10.2 - Prob. 10.2BCQCh. 10.2 - Prob. 10.2CCQCh. 10.2 - Prob. 10.2DCQCh. 10.2 - Prob. 10.2ECQCh. 10.2 - Prob. 10.2FCQCh. 10.3 - What do we mean by excess return and risk premium?
Ch. 10.3 - Prob. 10.3BCQCh. 10.3 - Prob. 10.3CCQCh. 10.3 - What is the first lesson from capital market...Ch. 10.4 - In words, how do we calculate a variance? A...Ch. 10.4 - Prob. 10.4BCQCh. 10.4 - Prob. 10.4CCQCh. 10.4 - What is the second lesson from capital market...Ch. 10.5 - Prob. 10.5ACQCh. 10.5 - Prob. 10.5BCQCh. 10.6 - What is an efficient market?Ch. 10.6 - Prob. 10.6BCQCh. 10 - Section 10.1Say you buy a share of stock for 50....Ch. 10 - Prob. 10.3CCh. 10 - Prob. 10.4CCh. 10 - Prob. 10.5CCh. 10 - Prob. 10.6CCh. 10 - Prob. 1CTCRCh. 10 - Prob. 2CTCRCh. 10 - Risk and Return. We have seen that over long...Ch. 10 - Market Efficiency Implications. Explain why a...Ch. 10 - Prob. 5CTCRCh. 10 - Prob. 6CTCRCh. 10 - Prob. 7CTCRCh. 10 - Prob. 8CTCRCh. 10 - Efficient Markets Hypothesis. There are several...Ch. 10 - Prob. 10CTCRCh. 10 - Prob. 1QPCh. 10 - Prob. 2QPCh. 10 - Prob. 3QPCh. 10 - Prob. 4QPCh. 10 - Nominal versus Real Returns. What was the...Ch. 10 - Bond Returns. What is the historical real return...Ch. 10 - Prob. 7QPCh. 10 - Prob. 8QPCh. 10 - Prob. 9QPCh. 10 - Calculating Real Returns and Risk Premiums. For...Ch. 10 - Prob. 11QPCh. 10 - Prob. 12QPCh. 10 - Calculating Returns. You purchased a zero-coupon...Ch. 10 - Prob. 14QPCh. 10 - Prob. 15QPCh. 10 - Calculating Real Returns. Refer to Table 10.1....Ch. 10 - Return Distributions. Refer back to Figure 10.10....Ch. 10 - Prob. 18QPCh. 10 - Prob. 19QPCh. 10 - Arithmetic and Geometric Returns. A stock has had...Ch. 10 - Prob. 21QPCh. 10 - Prob. 22QPCh. 10 - Prob. 23QPCh. 10 - Prob. 24QPCh. 10 - Prob. 25QPCh. 10 - Prob. 26QPCh. 10 - Prob. 27QPCh. 10 - Prob. 28QPCh. 10 - Prob. 1CCCh. 10 - Prob. 2CCCh. 10 - Prob. 3CCCh. 10 - Prob. 4CCCh. 10 - Prob. 5CC
Knowledge Booster
Similar questions
- Respond to each of the following comments.a. If stock prices follow a random walk, then capital markets are little different from a casino.b. A good part of a company’s future prospects are predictable. Given this fact, stock prices can’t possibly follow a random walk.c. If markets are efficient, you might as well select your portfolio by throwing darts at the stock listings in The Wall Street Journal.arrow_forwardIt is usually possible to reduce the risk of investing in the stock market by buying a wide range of stockS*A. TrueB. Falsearrow_forwardIt is usually possible to reduce the risk of investing in the stock market by buying a wide range of stockS *A. TrueB. Falsearrow_forward
- What are the risks and rewards of investing in the stock market as compared to the bond market?arrow_forwardWhat are efficient markets? Imagine if the price of a stock is going up and financial markets are efficient what can you tell us about the nature of the stock? What if the markets are inefficient then how would you react to increasing prices for a particular stock?arrow_forwardwhich of the following statements is true? Select one: Investors sell a stock when required return is less than expected return and buy a stock when required return above expected return None of the answers are correct Investors buy a stock when it is under-valued and sell it when it is over-valued Investors sell a stock when it is under-valued and buy it when it is over-valued.arrow_forward
- Alhaji Haruna considers that since capital markets are efficient, he doesn’t need to read the financial press or be involved in stock research before purchasing stocks for his portfolio. He simply throws darts at the stock pages and buys the stocks the darts hit. Our stock research and analysis important when buying and selling stocks in an efficient market?arrow_forwardIf investing in the stock market today, how would your decisions be affected based on what you know about the market? If you already invest in the stock market, will you start doing anything differently?arrow_forwardWhy you should invest in stocks?arrow_forward
- Before you put your money down and purchase a stock, what should you know about it?arrow_forwardWould an investor concerned about market volatility be happier investing in large cap or small cap stocks? Why?arrow_forwardYou are a risk-averse investor who is considering investing in one of two economies. The expectedreturn and volatility of all stocks in both economies is the same. In the first economy, all stocks movetogether in good times all prices rise together, and in bad times they all fall together. In the secondeconomy, stock returns are independent one stock increasing in price has no effect on the prices ofother stocks. Which economy would you choose to invest in? Explain. a. A risk averse investor would prefer the economy in which stock returns are independent becauseby combining the stocks into a portfolio he or she can get a higher expected return than in theeconomy in which all stocks move together.b. A risk averse investor would choose the economy in which stock returns are independent becauserisk can be diversified away in a large portfolio.c. A risk averse investor is indifferent in both cases because he or she faces unpredictable risk.d. A risk averse investor would choose the economy…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education