Why would an advocate of the efficient market hypothesis believe that even if many investors exhibit the behavioral biases, security prices might still be set efficiently?
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- If the weakest form of market efficiency holds, then security prices reflect all information found in past prices and volume. Thus, traditional "technical analysis" will not work. Group of answer choices True FalseEven if behavioral biases do not affect equilibrium asset prices, why might it still be important for investors to be aware of them?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?
- If the security market is efficient in the strong form, then _____. Group of answer choices a. it is impossible to consistently outperform the market by using technical analysis, which tries to find security mispricing by analyzing historical security price data b. it is impossible to consistently outperform the market by using fundamental analysis, which tries to find security mispricing by analyzing non-price public information c. it is impossible to consistently outperform the market by using inside information d. it is impossible to consistently outperform the market by using technical analysis, fundamental analysis or inside informationIf we are speaking about the CAPM model and undiversifiable risks. Then what is meant by returns which are not captured by the market return.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.
- Which of the following statements are true if the efficient market hypothesis holds?a. It implies that future events can be forecast with perfect accuracy.b. It implies that prices reflect all available information.c. It implies that security prices change for no discernible reason.d. It implies that prices do not fluctuate.What would happen to market efficiency if all investors attempted to follow a passive strategy?Does the efficient market hypothesis suggest that an investor can outperform the market? What effect does the arrival of information have on the market efficiency? How rapidly do security prices change in response to new information in an efficient market?
- Mark thinks that there is an interesting paradox of the efficient market hypothesis. If the market believes that prices reflect all information, investors will stop seeking mispriced securities. This may lead to more mispriced stocks and more inefficiency. However, if the market believes that inefficiency still exists, the competition of trying to be the first to find mispriced securities will make markets more efficient. Do you agree with Mark? Why or why not? Please briefly comment.Advocates of the efficient market hypothesis would agree that it is virtually impossible for any investor to consistenrly outperform the market (T/F)An 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 uncertain