Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Textbook Question
Chapter 13.3, Problem 3CC
What must be true about the behavior of small, uninformed investors for them to have an impact on market prices?
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Chapter 13 Solutions
Corporate Finance
Ch. 13.1 - If investors attempt to buy a stock with a...Ch. 13.1 - What is the consequence of investors exploiting...Ch. 13.2 - How can an uninformed or unskilled investor...Ch. 13.2 - Under what conditions will it be possible to earn...Ch. 13.3 - Do investors hold well-diversified portfolios?Ch. 13.3 - Why is the high trading volume observed in markets...Ch. 13.3 - What must be true about the behavior of small,...Ch. 13.4 - What are several systematic behavioral biases that...Ch. 13.4 - Prob. 2CCCh. 13.5 - Prob. 1CC
Ch. 13.5 - Prob. 2CCCh. 13.6 - Prob. 1CCCh. 13.6 - Prob. 2CCCh. 13.7 - Prob. 1CCCh. 13.7 - How can you use the Fama-French-Carhart factor...Ch. 13.8 - Which is the most popular method used by...Ch. 13.8 - Prob. 2CCCh. 13 - Assume that all investors have the same...Ch. 13 - Assume that the CAPM is a good description of...Ch. 13 - Prob. 3PCh. 13 - Prob. 4PCh. 13 - Prob. 5PCh. 13 - Explain what the following sentence means: The...Ch. 13 - You are trading in a market in which you know...Ch. 13 - Prob. 8PCh. 13 - Your brother Joe is a surgeon who suffers badly...Ch. 13 - Prob. 11PCh. 13 - Suppose that all investors have the disposition...Ch. 13 - Prob. 14PCh. 13 - Prob. 15PCh. 13 - Prob. 16PCh. 13 - Prob. 17PCh. 13 - Prob. 18PCh. 13 - Prob. 19PCh. 13 - Prob. 20PCh. 13 - Prob. 21PCh. 13 - Prob. 22PCh. 13 - Prob. 23PCh. 13 - Prob. 24PCh. 13 - Prob. 25PCh. 13 - Prob. 26PCh. 13 - Prob. 27PCh. 13 - Prob. 28P
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- What is weak-form EMH? What would you expect to see/not see if markets where weak form efficient? In other words, can you think of market events that would serve as evidence that market is or isn’t weak-form efficient?arrow_forwardWhat would happen to market efficiency if all investors attempted to follow a passive strategy?arrow_forwardWhat are the implications of the efficient market hypothesis for investors who buy and sell stocks in an attempt to beat “beat the market”?arrow_forward
- Why are the following “effects” considered efficient market anomalies? Are there rational explanations for any of these effects?a. P/E effect.b. Book-to-market effect.c. Momentum effect.d. Small-firm effect.arrow_forwardWhich of the following statements about the Efficient Market Hypothesis (EMH) is incorrect? Group of answer choices a)If the market is strong-form efficient, investors can not earn abnormal returns using inside information. b) If the investment in small firms earns a positive abnormal return, the stock market is not semi-strong form efficient. c) If a market is efficient, investors tend to follow a passive investment strategy. d) If the future stock price change depends on its history, the market is not weak-form efficient. e) If a market is weak-form efficient, fundamental analysis can not earn a positive abnormal return.arrow_forwardMarket timers focus onusing overall market trends as a basis for predicting when to buy or sell investments. However, they can use valuation techniques on specific financial instruments to support their decision. True or false?arrow_forward
- Which of the following is not a characteristic of an efficient market? Investors can frequently make profits by predicting asset market prices that are different from intrinsic values. The market value of all securities at any one instant in time fully reflect all available information. Investors act rationally. The forces of demand and supply work to maintain that the security's market price and its intrinsic value are in equilibrium.arrow_forwardRegarding Efficient Market Hypothesis (EMH), which of the following statements is TRUE? Investors in the market are assumed to be rational and own private information. If the semi-strong form of EMH is true, all information contained in the history of past prices has been reflected by the current price. If the semi-strong form of EMH is true, you cannot beat the market by trading on private information. Post-earnings announcement drift is consistent with the semi-strong form of EMH.arrow_forwardExplain (i) the relation between market returns and investor sentiment, and (ii) the relation between market returns and conditional volatility. Discuss potential limitations of your work. Explain the relation between market returns and investor sentiment. Explain the relation between market returns and conditional volatility. Discuss limitations of your analysis.arrow_forward
- Even if behavioral biases do not affect equilibrium asset prices, why might it still be important for investors to be aware of them?arrow_forwardSuggest what is the best financial instrument to offset market risk exposure and from market volatility? WHY?arrow_forwardWhy the following effects are considered efficient market anomalies? Are there rational explanation for any of them? a. P/E effect b. Book-to-market effect c. Momentum effect. d. Small firm effectarrow_forward
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