Homework Answers
THE EFFICIENT MARKET HYPOTHESIS:
- The correlation coefficient between stock returns for two non-overlapping periods should be zero. If not, one could use returns from one period to predict returns in later periods and make abnormal profits.
- Expected rates of return differ because of differential risk premiums.
- No. Any company (Ex:Microsoft’s) continuing profitability does not imply that stock market investors who purchased Microsoft shares after its success was already evident would have earned an exceptionally high return on their investments.
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Please provide the explanation for the answer if possible? Thank you. 15. If markets are efficient,...
Please provide the explanation for the answer if possible? Thank you 6. If markets are efficient,...
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6. If markets are efficient, which of the following would you never expect to see? 3 points) a An asset or stock that is mispriced b. An investor who beats the market in any period c A large number of investors beating the market in any period d. A small number of investors beating the market over long time periods e A small number of investors with common characteristics...
Please provide the explanation for the answer if possible? Thank you 20. "If the business cyele...
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20. "If the business cyele is predictable, and a stock has a positive beta, the stock's returns also must be predictable." Respond. (3 points)
Question 51 1 pts In an efficient market the correlation coefficient between stock returns for two...
Question 51 1 pts In an efficient market the correlation coefficient between stock returns for two non-overlapping time periods should be negative and small positive and small. negative and large. zero. positive and large.
Can you please provide the explanation for the answer if possible? Thank you. 1. Which of...
Can you please provide the explanation for the answer if
possible? Thank you.
1. Which of the following is an investment philosophy (as on (as opposed to an investment strategy)? (3 points) a Invest in low PE stocks h Invest in undervalued companies c Invest in companies that pay high dividends d Invest on the belief that investors over react to big news and announcements and that markets correct themselves over time e All of the above
Please provide the explanation for the answer if possible? Thank you. 16. "If all securities are...
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16. "If all securities are fairly priced, all must offer equal expected rates of return." Comment. (3 points
Please provide the explanation for the answer if possible? Thank you. Assume that you find an...
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Thank you.
Assume that you find an inefficiency in the market and a strategy to exploit it to make "excess" returns for yourself. Under which of the following conditions is that inefficiency likely to generate long standing profits? (3 points) 9. a If the inefficiency is difficult to spot and the trading strategy you use is b. If the inefficiency is difficult to spot and the trading strategy you use is...
Can you please provide the explanation for the answer if possible? Thank you! 0. To test...
Can you please provide the explanation for the answer if
possible? Thank you!
0. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. Assume that you test a strategy and find that it makes excess returns after adjusting for risk using the CAPM (with beta used to measure risk). Which of the following conclusions could you draw? (3 points) a. The strategy beat the market during the testing period...
Can you please provide the explanation for the answer if possible. Thank you. 10. To test...
Can you please provide the explanation for the answer if
possible. Thank you.
10. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. excess returns after adjusting for risk using the CAPM (with beta used t risk). Which of the following conclusions could you draw? (3 points) Assume that you test a strategy and find that it makes o measure a b. c The strategy beat the market during...
Please provide the explanation for the answe if possible? Thank you. 14. Assume that you have...
Please provide the explanation for the answe if possible?
Thank you.
14. Assume that you have just tested a strategy that is purported to beat the market. On paper, over the last decade, this strategy would have generated an annual return of 1190 while the annual return on the market was 9%. The strategy does have transactions & trading costs that amount to 1% annually and it is slightly riskier (beta -| .2) than th the risk-Dadjusted, trading-Ccost adjusted returm...
Can you please provide the explanation for the answer if possible? Thank you! 13. You believe...
Can you please provide the explanation for the answer if
possible? Thank you!
13. You believe that small market-cap companies that are lightly held by institutions deliver much higher risk adjusted returns than the rest of the market. Which of the following would be the best test of this proposition? (3 points) Starting with a sample of all publicly traded companies today, find companies that have small market capitalizations and low institutional holdings today and estimate the returns you would...
Please provide the explanation for the answer if possible?
Thank you
6. If markets are efficient, which of the following would you never expect to see? 3 points) a An asset or stock that is mispriced b. An investor who beats the market in any period c A large number of investors beating the market in any period d. A small number of investors beating the market over long time periods e A small number of investors with common characteristics...
Please provide the explanation for the answer if possible?
Thank you
20. "If the business cyele is predictable, and a stock has a positive beta, the stock's returns also must be predictable." Respond. (3 points)
Can you please provide the explanation for the answer if
possible? Thank you.
1. Which of the following is an investment philosophy (as on (as opposed to an investment strategy)? (3 points) a Invest in low PE stocks h Invest in undervalued companies c Invest in companies that pay high dividends d Invest on the belief that investors over react to big news and announcements and that markets correct themselves over time e All of the above
Please provide the explanation for the answer if possible?
Thank you.
16. "If all securities are fairly priced, all must offer equal expected rates of return." Comment. (3 points
Please provide the explanation for the answer if possible?
Thank you.
Assume that you find an inefficiency in the market and a strategy to exploit it to make "excess" returns for yourself. Under which of the following conditions is that inefficiency likely to generate long standing profits? (3 points) 9. a If the inefficiency is difficult to spot and the trading strategy you use is b. If the inefficiency is difficult to spot and the trading strategy you use is...
Can you please provide the explanation for the answer if
possible? Thank you!
0. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. Assume that you test a strategy and find that it makes excess returns after adjusting for risk using the CAPM (with beta used to measure risk). Which of the following conclusions could you draw? (3 points) a. The strategy beat the market during the testing period...
Can you please provide the explanation for the answer if
possible. Thank you.
10. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. excess returns after adjusting for risk using the CAPM (with beta used t risk). Which of the following conclusions could you draw? (3 points) Assume that you test a strategy and find that it makes o measure a b. c The strategy beat the market during...
Please provide the explanation for the answe if possible?
Thank you.
14. Assume that you have just tested a strategy that is purported to beat the market. On paper, over the last decade, this strategy would have generated an annual return of 1190 while the annual return on the market was 9%. The strategy does have transactions & trading costs that amount to 1% annually and it is slightly riskier (beta -| .2) than th the risk-Dadjusted, trading-Ccost adjusted returm...
Can you please provide the explanation for the answer if
possible? Thank you!
13. You believe that small market-cap companies that are lightly held by institutions deliver much higher risk adjusted returns than the rest of the market. Which of the following would be the best test of this proposition? (3 points) Starting with a sample of all publicly traded companies today, find companies that have small market capitalizations and low institutional holdings today and estimate the returns you would...
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