discuss market efficiency. How does this affect investors?
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In 100 words or less, discuss market efficiency. How does this affect investors?
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Solved in 2 steps
- This problem, like the first one, is a brain teaser. If a market is efficient, how is it possible for an investor to earn a profit?Describe the SML in words. What is it saying about how investors form required rates of return? Thoroughly evaluate the implications of the SML's message.What is market efficiency? Define. In addition, what are the important implications for financial managers when markets operate efficiently?
- Participation #7: Why are ROE and EPS such important measures of performance to investors?Select all that are true with respect to the theory of market efficiency. Group of answer choices If markets are efficient, investors cannot earn positive returns If markets are efficient, it means prices are always "right" in that the reflect perfect foresight into what will happen in the future Strong form market efficiency suggests that all information, public or private, is reflected in current prices in an unbiased way Market efficiency suggests that relevant information is quickly impounded into prices If transaction costs are high, then prices are less likely to reflect all available informationWhat 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?
- Which of the following decision criteria is the easiest to use and very popular among investors? O Payback period. O Internal rate of return. O Average accounting return. Net present value. O Discounted return on investment.Explain what is the “behavioral view” of market efficiency? Cite some sourcesDiscuss the importance of market efficiency, and explain why some markets are more efficient than others. Develop a simple understanding of behavioral finance.
- If prices are as likely to increase as decrease, why do investors earn positive returns from the market on average?What are the stages of the Business Cycle and how would you adjust your portfolio given the different stages of the economy?Explain all you know about “efficiency of financial markets”. What are the evidences for and against efficient markets hypothesis?