Q: Suppose that during a certain week the Fed announces a new monetary
Suppose that during a certain week the Fed announces a new monetary growth policy, Congress surprisingly passes legislation restricting imports of foreign automobiles, and Ford comes out with a new ca...
See AnswerQ: Shares of small firms with thinly traded stocks tend to show positive
Shares of small firms with thinly traded stocks tend to show positive CAPM alphas. Is this a violation of the efficient market hypothesis?
See AnswerQ: Examine the accompanying figure, which presents cumulative abnormal returns both before
Examine the accompanying figure, which presents cumulative abnormal returns both before and after dates on which insiders buy or sell shares in their firms. How do you interpret this figure? What are...
See AnswerQ: Suppose that as the economy moves through a business cycle, risk
Suppose that as the economy moves through a business cycle, risk premiums also change. For example, in a recession, when people are concerned about their jobs, risk tolerance might be lower and risk p...
See AnswerQ: Dudley Trudy, CFA, recently met with one of his clients
Dudley Trudy, CFA, recently met with one of his clients. Trudy typically invests in a master list of 30 equities drawn from several industries. As the meeting concluded, the client made the following...
See AnswerQ: At a cocktail party, your co-worker tells you that
At a cocktail party, your co-worker tells you that he has beaten the market for each of the last three years. Suppose you believe him. Does this shake your belief in efficient markets?
See AnswerQ: “Constantly fluctuating stock prices suggest that the market does not know
“Constantly fluctuating stock prices suggest that the market does not know how to price stocks.” Comment.
See AnswerQ: Why are the following “effects” considered efficient market anomalies?
Why are the following “effects” considered efficient market anomalies? Are there rational explanations for any of these effects? a. P/E effect. b. Book-to-market effect. c. Momentum effect. d. Small-f...
See AnswerQ: If prices are as likely to increase as decrease, why do
If prices are as likely to increase as decrease, why do investors earn positive returns from the market on average?
See AnswerQ: Explain how some of the behavioral biases discussed in the chapter might
Explain how some of the behavioral biases discussed in the chapter might contribute to the success of technical trading rules.
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