Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Which of the following statements about speculation is true?
A) Society is worse off with speculation, since speculation has no value.
B) Speculation moves resources through time from higher to lower value uses.
C) Speculators have a bad image with the public because people clearly understand how speculative activity increases prices today, but don’t see how prices in the future are lower than they would be without speculation.
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- No risk, no reward. Most people intuitively understand that they have to bear some risk to achieve an acceptable return on their investment portfolios. But how much risk is right for you? If your investments turn sour, you may put at jeopardy your ability to retire, to pay for your kid's college education, or to weather an unexpected need for cash. These worst-case scenarios focus our attention on how to manage our exposure to uncertainty. Assessing and quantifying-risk aversion is, to put it mildly, difficult. It requires confronting at least these two big questions. First, how much investment risk can you afford to take? If you have steady high-paying job, for example, you have greater ability to withstand investment losses. Conversely, if you are close to retirement, you have less ability to adjust your lifestyle in response to bad investment outcomes. Second, you need to think about your personality and decide how much risk you can tolerate. At what point will you be unable to…arrow_forwardSome speculators think you should buy stock which are heavily shorted. Their reasoning is: a. The more a stock is shorted, the more that needs to be bought to close the short positions. b. The more a stock is shorted, the more speculators will have to sell in the future. c. the crowd is always right.arrow_forwardDo you think investors can earn abnormal returns in financial markets that are at least semi strong-form efficient?arrow_forward
- Advocates of the efficient market hypothesis would agree that it is virtually impossible for any investor to consistenrly outperform the market (T/F)arrow_forwardAn efficient market is one in which no one can profit from having a better information than the rest. Is the statement true or false or uncertainarrow_forwardBehavioural finance is arguably most useful in explaining asset prices when there are significant numbers of “noise traders” and limits to arbitrage. Why is this so?arrow_forward
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