PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 13, Problem 5PS
Market efficiency How would you respond to the following comments?
- a. “
Efficient market , my eye! I know lots of investors who do crazy things.” - b. “Efficient market? Balderdash! I know at least a dozen people who have made a bundle in the stock market.”
- c. “The trouble with the efficient-market theory is that it ignores investors’ psychology.”
- d. “Despite all the limitations, the best guide to a company’s value is its written-down book value. It is much more stable than market value, which depends on temporary fashions.”
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Students have asked these similar questions
Which of the following statements is incorrect?
Select one:
A. It is possible for markets to be efficient with respect to some information and inefficient with respect to other information
B. It is possible for some markets to be more efficient than others
C. The market is likely to be more efficient with respect to companies where there is greater analyst following
D. The market is totally efficient with respect to companies providing regular dividends to investors
8. The efficient markets hypothesis
True or False: The efficient markets hypothesis holds only if all investors are rational.
O False
O True
Almost all financial theory and decision models assume that the financial markets are efficient. The informational efficiency of financial markets
determines the ability of investors to "beat" the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, they
will react rapidly as new relevant information becomes available. Financial theorists have identified three levels of informational efficiency that reflect
what information is incorporated in stock prices.
Identify the form of capital market efficiency under the efficient market hypothesis described in the following statement:
Current market prices reflect all relevant information, whether it is known publicly or privately.
This statement is consistent with:
O Semistrong form efficiency
O Strong form efficiency
O Weak form efficiency
“Investors can only get normal profit”. Give detailed explanation on this statement and apply the market efficiency theory in your answer
Chapter 13 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 13 - Market efficiency True or false? The...Ch. 13 - Prob. 2PSCh. 13 - Market efficiency Which (if any) of these...Ch. 13 - Prob. 4PSCh. 13 - Market efficiency How would you respond to the...Ch. 13 - Market efficiency Respond to the following...Ch. 13 - Prob. 7PSCh. 13 - Prob. 8PSCh. 13 - Market efficiency evidence Which of the following...Ch. 13 - Prob. 10PS
Ch. 13 - Prob. 11PSCh. 13 - Prob. 12PSCh. 13 - Market efficiency implications What does the...Ch. 13 - Prob. 14PSCh. 13 - Prob. 15PSCh. 13 - Abnormal returns Here are alphas and betas for...Ch. 13 - Prob. 18PSCh. 13 - Behavioral finance True or false? a. Most managers...Ch. 13 - Prob. 20PSCh. 13 - Prob. 21PSCh. 13 - Prob. 22PS
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