Adequate Information: Markets are efficient. To construct: What should be the correlation coefficient between stock returns for two no overlapping time periods. Introduction:Correlation Coefficient is a measure of strength of relationship between the relative movements of two variables.

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Answer 1

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 11, Problem 1PS

Summary Introduction

Adequate Information:

Markets are efficient.

To construct:

What should be the correlation coefficient between stock returns for two no overlapping time periods.

Introduction:Correlation Coefficientis a measure of strength of relationship between the relative movements of two variables.

Expert Solution & Answer

Answer to Problem 1PS

Hence, the correlation coefficient for two non-overlapping periods shall be zero.

Explanation of Solution

In efficient markets, prices of securities quickly adjust to any new information that arrives in the market thereby reflecting all the available information in market in current security prices.

If markets are efficient, then stock prices would always reflect any market information in their price movements at any point of time. The correlation coefficient for two non-overlapping periods shall be zero. Else, one may leverage returns from one period to forecast returns in other time periods thereby making subnormal profits.

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Students have asked these similar questions

If markets are efficient, what should be the correlation coefficient between stock returns for two nonoverlapping time periods?

When working with the CAPM, which of the following factors can be determined with the most precision? a. The beta coefficient of "the market," which is the same as the beta of an average stock. b. The beta coefficient, bi, of a relatively safe stock. c. The market risk premium (RPM). d. The most appropriate risk-free rate, rRF. e. The expected rate of return on the market, rM.

What is the average return in the market (Rm)?

Answer 2

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 11, Problem 1PS

Summary Introduction

Adequate Information:

Markets are efficient.

To construct:

What should be the correlation coefficient between stock returns for two no overlapping time periods.

Introduction:Correlation Coefficientis a measure of strength of relationship between the relative movements of two variables.

Expert Solution & Answer

Answer to Problem 1PS

Hence, the correlation coefficient for two non-overlapping periods shall be zero.

Explanation of Solution

In efficient markets, prices of securities quickly adjust to any new information that arrives in the market thereby reflecting all the available information in market in current security prices.

If markets are efficient, then stock prices would always reflect any market information in their price movements at any point of time. The correlation coefficient for two non-overlapping periods shall be zero. Else, one may leverage returns from one period to forecast returns in other time periods thereby making subnormal profits.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 11, Problem 1PS

Summary Introduction

Adequate Information:

Markets are efficient.

To construct:

What should be the correlation coefficient between stock returns for two no overlapping time periods.

Introduction:Correlation Coefficientis a measure of strength of relationship between the relative movements of two variables.

Expert Solution & Answer

Answer to Problem 1PS

Hence, the correlation coefficient for two non-overlapping periods shall be zero.

Explanation of Solution

In efficient markets, prices of securities quickly adjust to any new information that arrives in the market thereby reflecting all the available information in market in current security prices.

If markets are efficient, then stock prices would always reflect any market information in their price movements at any point of time. The correlation coefficient for two non-overlapping periods shall be zero. Else, one may leverage returns from one period to forecast returns in other time periods thereby making subnormal profits.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 11, Problem 1PS

Summary Introduction

Adequate Information:

Markets are efficient.

To construct:

What should be the correlation coefficient between stock returns for two no overlapping time periods.

Introduction:Correlation Coefficientis a measure of strength of relationship between the relative movements of two variables.

Expert Solution & Answer

Answer to Problem 1PS

Hence, the correlation coefficient for two non-overlapping periods shall be zero.

Explanation of Solution

In efficient markets, prices of securities quickly adjust to any new information that arrives in the market thereby reflecting all the available information in market in current security prices.

If markets are efficient, then stock prices would always reflect any market information in their price movements at any point of time. The correlation coefficient for two non-overlapping periods shall be zero. Else, one may leverage returns from one period to forecast returns in other time periods thereby making subnormal profits.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 11, Problem 1PS

Summary Introduction

Adequate Information:

Markets are efficient.

To construct:

What should be the correlation coefficient between stock returns for two no overlapping time periods.

Introduction:Correlation Coefficientis a measure of strength of relationship between the relative movements of two variables.

Expert Solution & Answer

Answer to Problem 1PS

Hence, the correlation coefficient for two non-overlapping periods shall be zero.

Explanation of Solution

In efficient markets, prices of securities quickly adjust to any new information that arrives in the market thereby reflecting all the available information in market in current security prices.

If markets are efficient, then stock prices would always reflect any market information in their price movements at any point of time. The correlation coefficient for two non-overlapping periods shall be zero. Else, one may leverage returns from one period to forecast returns in other time periods thereby making subnormal profits.

Answer 6

Chapter 11, Problem 1PS

Summary Introduction

Adequate Information:

Markets are efficient.

To construct:

What should be the correlation coefficient between stock returns for two no overlapping time periods.

Introduction:Correlation Coefficientis a measure of strength of relationship between the relative movements of two variables.

Expert Solution & Answer

Answer to Problem 1PS

Hence, the correlation coefficient for two non-overlapping periods shall be zero.

Explanation of Solution

In efficient markets, prices of securities quickly adjust to any new information that arrives in the market thereby reflecting all the available information in market in current security prices.

If markets are efficient, then stock prices would always reflect any market information in their price movements at any point of time. The correlation coefficient for two non-overlapping periods shall be zero. Else, one may leverage returns from one period to forecast returns in other time periods thereby making subnormal profits.

Answer 7

Chapter 11, Problem 1PS

Summary Introduction

Adequate Information:

Markets are efficient.

To construct:

What should be the correlation coefficient between stock returns for two no overlapping time periods.

Introduction:Correlation Coefficientis a measure of strength of relationship between the relative movements of two variables.

Answer 8

Expert Solution & Answer

Answer to Problem 1PS

Hence, the correlation coefficient for two non-overlapping periods shall be zero.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

In efficient markets, prices of securities quickly adjust to any new information that arrives in the market thereby reflecting all the available information in market in current security prices.

If markets are efficient, then stock prices would always reflect any market information in their price movements at any point of time. The correlation coefficient for two non-overlapping periods shall be zero. Else, one may leverage returns from one period to forecast returns in other time periods thereby making subnormal profits.

Answer 12

Ch. 11 - Prob. 1PS Ch. 11 - Prob. 2PS Ch. 11 - Prob. 3PS Ch. 11 - Prob. 4PS Ch. 11 - Prob. 5PS Ch. 11 - Prob. 6PS Ch. 11 - Prob. 7PS Ch. 11 - Prob. 8PS Ch. 11 - Prob. 9PS Ch. 11 - Prob. 10PS

Adequate Information: Markets are efficient. To construct: What should be the correlation coefficient between stock returns for two no overlapping time periods. Introduction:Correlation Coefficient is a measure of strength of relationship between the relative movements of two variables.

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Adequate Information:

Markets are efficient.

To construct:

What should be the correlation coefficient between stock returns for two no overlapping time periods.

Introduction:Correlation Coefficientis a measure of strength of relationship between the relative movements of two variables.

Answer to Problem 1PS

Explanation of Solution

Want to see more full solutions like this?

Chapter 11 Solutions

Adequate Information: Markets are efficient. To construct: What should be the correlation coefficient between stock returns for two no overlapping time periods. Introduction:Correlation Coefficient is a measure of strength of relationship between the relative movements of two variables.

Videos

Adequate Information: Markets are efficient. To construct: What should be the correlation coefficient between stock returns for two no overlapping time periods. Introduction:Correlation Coefficientis a measure of strength of relationship between the relative movements of two variables.

Answer to Problem 1PS

Explanation of Solution

Want to see more full solutions like this?

Chapter 11 Solutions

Adequate Information:

Markets are efficient.

To construct:

What should be the correlation coefficient between stock returns for two no overlapping time periods.

Introduction:Correlation Coefficientis a measure of strength of relationship between the relative movements of two variables.