INVESTMENTS(LL)W/CONNECT
11th Edition
ISBN: 9781260433920
Author: Bodie
Publisher: McGraw-Hill Publishing Co.
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Question
Chapter 11, Problem 6PS
Summary Introduction
To determine: Comment on the statement whether the stock market does not know how to prices, and hence the stock prices are highly variable.
Introduction: The marketplace where the securities, bonds, forex securities, derivatives and such other are traded, is called the Financial Markets.
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Students have asked these similar questions
If most participants in the stock market do not follow what is happening to monetary aggregates, prices of common stock will not fully reflect information about them. Is this statement true? Explain your answer
Explain why short-term stock price and market movements appear to be difficult to predict with any accuracy. (Hint-market efficiency)
True or False: Technical Analysis (the practice of analyzing past stock price and volume data in order to predict future stock price behavior) would be useless under any form of the Efficient Market Hypothesis (EMH).
Group of answer choices
True
False
Chapter 11 Solutions
INVESTMENTS(LL)W/CONNECT
Ch. 11 - Prob. 1PSCh. 11 - Prob. 2PSCh. 11 - Prob. 3PSCh. 11 - Prob. 4PSCh. 11 - Prob. 5PSCh. 11 - Prob. 6PSCh. 11 - Prob. 7PSCh. 11 - Prob. 8PSCh. 11 - Prob. 9PSCh. 11 - Prob. 10PS
Ch. 11 - Prob. 11PSCh. 11 - Prob. 12PSCh. 11 - Prob. 13PSCh. 11 - Prob. 14PSCh. 11 - Prob. 15PSCh. 11 - Prob. 16PSCh. 11 - Prob. 17PSCh. 11 - Prob. 18PSCh. 11 - Prob. 19PSCh. 11 - Prob. 20PSCh. 11 - Prob. 21PSCh. 11 - Prob. 22PSCh. 11 - Prob. 23PSCh. 11 - Prob. 24PSCh. 11 - Prob. 25PSCh. 11 - Prob. 26PSCh. 11 - Prob. 27PSCh. 11 - Prob. 28PSCh. 11 - Prob. 29PSCh. 11 - Prob. 1CPCh. 11 - Prob. 2CPCh. 11 - Prob. 3CPCh. 11 - Prob. 4CPCh. 11 - Prob. 5CPCh. 11 - Prob. 6CPCh. 11 - Prob. 7CPCh. 11 - Prob. 8CPCh. 11 - Prob. 9CPCh. 11 - Prob. 10CP
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- II. Determine what form of the theory of efficient market is being described in each item. Write W for weak form, SE for semi-strong form, ST_ for strong form. _4. The stock prices already reflect all publicly available data. 5. The stock prices already reflect all past market trading data. _6. The technical analysis will not give new information in this form. 7. The fundamental analysis will not give new information in this form. 8. Both the fundamental and technical analysis will not give new information. _9. The stock pricess show historical information which may or may not include inside information. _10. The stodk prices already reflect all publicly available date such as any product, financial statement, etc.arrow_forwardAre stock prices affected more by long-term or short-termperformance? Explain.arrow_forward“There is no alpha in an efficient market”. In light of this statement, briefly describe market efficiency and its forms and why an investor may not be able to locate stocks that provide a positive alpha (undervalued stocks) consistentlyarrow_forward
- Which of the following is not possible to describe technical analysis? Select one: O Market is efficient and all information is reflected in prices O Prices are determined by supply and demand O None of the answers are correct O technical analysis looking for stock trends and patterns that might predict future movementarrow_forwardStrong form efficient market hypothesis states that stock prices reflects all the information in a market. The information may be public or private (i.e., insider information about the market) and such information will not benefit an investor in the form of higher returns.arrow_forward5. Which of the following is not a technical trading rule category? a. Contrary-opinion rules b. Follow the smart money rules c. Anti-fundamental and anti-portfolio approaches d. Stock price and volume techniques e. Other market environment indicatorsarrow_forward
- How can you evaluate if stocks are underperforming?arrow_forwardStock prices in an inefficient market tend to adjust faster to the new public information. Select one: OTrue O Falsearrow_forwardYou 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.arrow_forward
- Which of the following does NOT correctly complete this sentence: In general, the link between an information announcement and the stock price is that Select one: O a. the stock price will not change if the announcement provided only anticipated information. O b. if markets are efficient in the semi-strong form, then the market will react rapidly to the new information. O c. the expected stock return will change if the announcement contains a surprise component. O d. in order for the price of the stock to change, the announcement must be relevant to that particular stock and must be unanticipated. O e. only announcements that have already been discounted will affect the stock price.arrow_forwardYou have been using a "special" measure of a stock's trading activity (its past price and trading volume records) to "beat the market." You have failed. You are unable to use past pricing and trading volume to "beat the market." This is evidence that the market is: weak form efficient O semi-strong form inefficient strong form efficient weak form inefficient semi-strong form efficierarrow_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_forward
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