Principles of Macroeconomics (MindTap Course List)
7th Edition
ISBN: 9781285165912
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 14, Problem 7QR
To determine
Efficient market hypothesis.
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What are the empirical evidences in favor of and against the efficient market hypothesis?
Which of the following would count as valid evidence against the efficient markets hypothesis?
(a) Some investors make huge profits betting on specific stocks on the stock market.
(b) Financial crises still occur.
(c) Stock prices always rise two days after good news is released.
(d) Stock prices are very volatile.
(e) A company’s stock price does not always rise with good news about that company.
: Why are we still talking about the Efficient Market Hypothesis all these years later?
Chapter 14 Solutions
Principles of Macroeconomics (MindTap Course List)
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- Disscuss the significance of the efficient market hypothesis for the financial managersarrow_forwardDiscuss the core principles of the Efficient Market Hypothesis. Explain one argument that may indicate why the stock market may not efficient.arrow_forwardThe Joint Hypothesis Problem implies that the Efficient Markets Hypothesis can easily be proved false. True Falsearrow_forward
- discuss the notion of efficient markets when extended to international financial markets.arrow_forwardWhich of the following would be considered as example of indirect finance?A. Abita borrowed $10,000 from his friend to finance his gaming business.B. Beancent invested his money in a famous mutual fund, which specialized in thetechnological industries.C. YNWA saves his money in bank.D. B & CE. All of the abovearrow_forwardExplain how accounting is used to track and monitor economic events that impact capital marketsarrow_forward
- Distinguish between public finance and private finance.arrow_forwardWhich of the below statements is false for frictionless financial markets? A.No transactions costs B.No corporate and personal taxes C.No agency costs between shareholders and debtholders D.Information asymmetry between managers and investorsarrow_forwardInvestment projects can be viewed as analogous to bank loans. True or false?arrow_forward
- Describe and explain the difference between active and passive investment policies.arrow_forwardWhich of the statements about subprime lending is false? Before the 2008 financial crisis, financial institutions increased the number of subprime loans they issued as home prices continued to rise. If a home owner is unable to afford the mortgage payments, the homeowner can always pay off the mortgage by selling the home. Subprime lending occurs when financial institutions issue loans to individuals who are less likely to be able to repay their loan than individuals who meet a set of standards. The risks associated with subprime lending increase as the likelihood of falling home prices increase.arrow_forwardBased on this video: https://youtu.be/Q-zp5Mb7FV0 Is this video related to the concept of corporate governance failure and/or capital markets? If yes, how?arrow_forward
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