Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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About market efficiency, which of the following statements is right:
a. In a highly efficient stock market, it is almost impossible for an investor to make profit from
the stock market.
b. In a highly efficient stock market, some smart investors can definitely beat the market even
without the inside information.
c. An investor can make profit by buying the stock of free Inc. since it just reported that the
half-year profit doubled with respect to that during the same period in the last year.
d. The stock prices of big companies are closer to their intrinsic values than those of small
companies since more people follow those big companies, whereas few people follow those
small companies.

Expert Solution
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Step 1

Market Efficiency refers to the level up to which the market prices of the stock match all the relevant data present at the time. Market Efficiency is used to find out if the stock is overvalued or undervalued, which gives rise to arbitrage opportunities.

 

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