Questions from Financial Markets

Q: Explain how stock volatility changed during the credit crisis of 2008-

Explain how stock volatility changed during the credit crisis of 2008-2009.

Q: Explain how short sales work in the mortgage markets. Are short

Explain how short sales work in the mortgage markets. Are short sales fair to homeowners? Are they fair to mortgage lenders?

Q: A consulting firm was hired to determine whether a particular trading strategy

A consulting firm was hired to determine whether a particular trading strategy could generate abnormal returns. The strategy involved taking positions based on recent historical movements in stock pri...

Q: Explain how economic growth affects the valuation of a stock.

Explain how economic growth affects the valuation of a stock.

Q: Assume that the expected inflation rate has just been revised upward by

Assume that the expected inflation rate has just been revised upward by the market. Would that change affect the required return by investors who invest in the stocks? Explain.

Q: How do earnings surprises affect valuations of stocks?

How do earnings surprises affect valuations of stocks?

Q: Explain the difference between a market order and a limit order.

Explain the difference between a market order and a limit order.

Q: Describe the short selling process. Explain the short interest ratio.

Describe the short selling process. Explain the short interest ratio. Investors can engage in short selling by selling a stock that they do not own. They must borrow the stock that they sell.

Q: Explain the difference between a long hedge and a short hedge used

Explain the difference between a long hedge and a short hedge used by financial institutions. When is a long hedge more appropriate than a short hedge?

Q: Explain how the probability distribution of a financial institution’s returns is affected

Explain how the probability distribution of a financial institution’s returns is affected when it uses interest rate futures to hedge. What does this imply about its risk?