Question

kat market spelets) 53 points) Joe observes that the lowest stock price for Facebook in the past three months was $135 and the highest was 5145. Thus he designs a strategy for the future to buy its stock whenever its price falls to below 5135 and sells it whenever it approaches $145. Joe's strategy is directly against the believers of the of efficient market hypothesis (EMH). a Weak fonn b. Semi-strong form c. Strong form d. Weak and semi-strong form e. Semi-strong and strong form 1. Weak, semi-strong, and strong form all three forms) 9. (3 points) If the market efficiency holds, a. There should be correlation between period returns b. Technical analysis can result in superior returns c. The market price would represent the true value of an asset. d. Security analysis would be beneficial in increasing the return on a portfolio 10. (2 points) Growth stocks usually exhibit price-to-book ratios and price-to-earnings ratios a. low, low b. low: high c. high; low d. high: high

Answer 1

Answer:
Question 8: F
Question 9: C

Explanation:
Efficient market hypothesis:

The security prices already reflect all the available information.

The efficient market hypothesis says that past price movement, earnings report and volume traded doesn't affect stocks Current price and can't be used to predict the stocks future directions.

In simple words, past performance doesn't guarantee the future performance of the stock price moment. The stock price follows a Brownian motion.

They are 3 levels of Market efficiency:
1. Strong efficiency: Insider information, fundamental analysis and technical analysis are unless in such a market.
2. Semi- Strong: fundamental analysis and technical analysis are unless in such a market.
3. Weak: technical analysis is unless in such a market.

Thus in an efficient market: the market value would represent the true value of an asset.

Question 10:
Answer: d. High, High
Explanation:
Growth stocks have high price to book value and price to earnings ratio.
As this stocks project Higher Growth, there is a higher demand for them- this high price.
EXAMPLE: Tesla