Finance
1. If markets are efficient, what should be the correlation coefficient between stock returns for two non-overlapping time periods?
2. A successful firm like Microsoft has consistently generated large profits for years. Is this a violation of the EMH?
3. Steady Growth Industries has never missed a dividend payment in its 94-year history. Does this make it more attractive to you as a possible purchase for your stock portfolio?
4. Over 25% of mutual funds outperform the market on average. Does this sound to contradict the proposition that the stock market is efficient? Explain.
5. Every January, the stock market earns abnormal returns. Does this sound to contradict the proposition that the stock market is efficient? Explain.
6. Insiders ear abnormal trading profits. Is it possible in an efficient market?
7. Suppose that, after conducting an analysis of past stock prices, you come up with the following observations. Which would appear to contradict the weak form of the efficient market hypothesis? Explain. a. The average rate of return is significantly greater than zero. b. The correlation between the return during a given week and the return during the following week is zero. c. One could have made superior returns by buying stock after a 10% rise in price and selling after a 10% fall. d. One could have made higher-than-average capital gains by holding stocks with low dividend yields.
8. Which of the following statements are true if the efficient market hypothesis holds? a. It implies that future events can be forecast with perfect accuracy. b. It implies that price reflect all available information c. It implies that security prices change for no discernible reason. d. It implies that prices do not fluctuate.
9. What is the implication for your investment strategies? Do you try to beat the market in your own portfolio management? If yes, why you think it is possible and how? If no, why?
Additional 10. Can you find
2. A successful firm like Microsoft has consistently generated large profits for years. Is this a violation of the EMH?
3. Steady Growth Industries has never missed a dividend payment in its 94-year history. Does this make it more attractive to you as a possible purchase for your stock portfolio?
4. Over 25% of mutual funds outperform the market on average. Does this sound to contradict the proposition that the stock market is efficient? Explain.
5. Every January, the stock market earns abnormal returns. Does this sound to contradict the proposition that the stock market is efficient? Explain.
6. Insiders ear abnormal trading profits. Is it possible in an efficient market?
7. Suppose that, after conducting an analysis of past stock prices, you come up with the following observations. Which would appear to contradict the weak form of the efficient market hypothesis? Explain. a. The average rate of return is significantly greater than zero. b. The correlation between the return during a given week and the return during the following week is zero. c. One could have made superior returns by buying stock after a 10% rise in price and selling after a 10% fall. d. One could have made higher-than-average capital gains by holding stocks with low dividend yields.
8. Which of the following statements are true if the efficient market hypothesis holds? a. It implies that future events can be forecast with perfect accuracy. b. It implies that price reflect all available information c. It implies that security prices change for no discernible reason. d. It implies that prices do not fluctuate.
9. What is the implication for your investment strategies? Do you try to beat the market in your own portfolio management? If yes, why you think it is possible and how? If no, why?
Additional 10. Can you find