CHAPTER 11: THE EFFICIENT MARKET HYPOTHESIS PROBLEM SETS 1. 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. 2. No. 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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Market Economy Notes (Capitalism): Capitalism was both an economic and political theory that grew throughout the Enlightenment. This is why it is sometimes referred to as “Classical Liberalism”. Adam Smith (1723-1790) -His books‚ The Theory of Moral Sentiments and An Inquiry Into the Nature of Causes of the Wealth of Nations were published in 1776. -The Theory of Moral Sentiments: In the work‚ Smith critically examines the moral thinking of his time‚ and suggests that conscience arises from social
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Explain‚ and illustrate using graphs‚ whether you think a perfectly competitive industry or a monopoly industry leads to more efficient outcomes for an economy. RESEARCH ESSAY Microeconomics is defined as a study of how economic decisions are made by individuals and groups along with the range of factors affecting those decisions. In relevance to this‚ the analysis of perfect competition and monopoly regarding efficiency is considered one of the most core basis to the understanding of Microeconomics
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How food relates to social determinants of health Social determinants of health are “the circumstances in which people are born‚ grow up‚ live‚ work and age‚ and the systems put in place to deal with illnesses”. Food/nutrition therefore relates to the social determinates of health due to the fact that it has an effect on the circumstances in which one is born‚ as well as having effects on the circumstances in which one lives‚ works‚ and ages. And ultimately nutrition does indeed play a major role
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Empirical Challenges to the Efficient Market Hypothesis 1. Introduction Random walks observed in stock return series prior to the 1970s puzzled a number of financial theorists and practitioners. In 1970‚ this puzzle was resolved by Eugene Fama (1970) who argued that the random walks observed in the behaviour of stock return series could be attributed to market efficiency. Market efficient meant that investors could not consistently make risk-adjusted returns by making investment decisions
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AF 3313 2011-12 Sem 2 Written Assignment Name: Kam Lai Yee ID: 09550708d Tutor: Howard Chow Q1. Efficient market is one in which stock prices fully reflect the information of a company‚ either positive or negative. If the information from a company is positive‚ investor will give a good response and the price of shares of this company will increase. Since the information is reflected in price at once‚ normal rate of return should only be obtained. Also the price that the firm received
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Efficient market hypothesis (EMH)‚ first promulgated by Eugene F. Fama (1970)‚ suggests that financial markets price assets precisely at their intrinsic worth given all publicly available information. Though several empirical works strongly confirm market efficiency‚ some of the hypotheses do not agree with the efficient market hypothesis‚ such as behavior finance hypothesis. This essay will discuss the assumption of efficient market hypothesis and implications when these assumptions do not hold
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Answer to Question 1: Efficient Market Hypothesis was firstly brought forward by E. Fama in 1960s. Its main believing is in that security prices fully reflect all available information in an efficient market‚ which allows investors to earn no above average risk-adjusted return (Fama‚ 1965). Although some technical studies and opportunistic investors have stretched hard in searching for proofs to challenge the efficient market hypothesis‚ and to prove above average returns could be gained by predicting
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MARKET ECONOMY | PLANNED ECONOMY | * The market economy is not run by a high authority. Instead it is run by many individuals regarding production‚ consumption and work. * The market is free and prices can be of a wide range * The market economy is intended for a middle/upper class. This is because people can earn as much money as they want‚ upper class people don’t have to distribute a profit evenly. * The theory of the market economy is to give people the capability to earn as much
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goal. There are four basic elements in managing‚ each playing an intricate function in how the process develops‚ and if the process will succeed or fail. Planning Merriam-Webster Online Dictionary defines planning as the act or process of making or carrying out plans and the establishment of goals‚ policies‚ and procedures for a social or economic unit (n.d.). Planning establishes a course of action‚ is the start point‚ and therefore affects each successive element of the management process. The
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