What factors can you think of that might explain why U.S. stock markets are more efficient (i.e., that prices reflect all available information) than stock markets in less developed countries? . If markets are indeed efficient, why do all these investment managers, financial analysts, mutual fund managers, etc., get paid for trying to find undervalued stocks?

What factors can you think of that might explain why U.S. stock markets are more efficient (i.e., that prices reflect all available information) than stock markets in less developed countries? . If markets are indeed efficient, why do all these investment managers, financial analysts, mutual fund managers, etc., get paid for trying to find undervalued stocks?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

1) What id the essential purpose for financial markets? 2) Which is more important, the primary market for stocks of the secondary market? Why? 3) How does a ponzi scheme work? 4) Discuss some of the forces that help make markets efficient? 5) What are institutional investors? Why are they needed in our economy? 6) What are some of the differences between a forward contract and a future contract?
“When the stock market rises, investment spending isincreasing.” Is this statement true, false, or uncertain?Explain your answer
2. If the value of the financial sector is in terms of reducing the individual risk in the economy, how could you measure the value of the financial sector without using information on loan payments (broadly construed to include any interest payment necessary to measure an interest rate or any payment that looks like a return on an investmemt)? If we think of the amount of individual risk remaining after individuals buy portfolios is a measure of the ineffectiveness of the financial sector [or its imperfections], what do you think accounts for these imperfections?
What is the diferrence between finanical institutions and financial markets and Can they both run more smoother.
What are efficient markets? Imagine if the price of a stock is going up and financial markets are efficient what can you tell us about the nature of the stock? What if the markets are inefficient then how would you react to increasing prices for a particular stock?
After the global financial crisis, are investors operating in the securities markets more cautious in making investment decisions, or do they more thoroughly analyze the investment risk of investing in capital markets?
Explain all you know about “efficiency of financial markets”. What are the evidences for and against efficient markets hypothesis?
With a decline in the number of publicly traded companies and the growth of other investment vehicles such as private equities, hedge funds, junk bonds, etc., some people claim that the investment world is becoming more and more unfair towards smaller investors since most of the alternative investment vehicles are only available to institutions or high-net-worth individuals. Do you agree or disagree with this claim?
he concept of market efficiency underpins almost all financial theory and decision models. When financial markets are efficient, the price of a security—such as a share of a particular corporation’s common stock—should be (equal to or more than) the present value estimate of the firm’s expected cash flows discounted by its appropriate rate of return (also called the intrinsic value of the stock). Almost all financial theory and decision models assume that the financial markets are efficient. The informational efficiency of financial markets determines the ability of investors to “beat” the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, they will react rapidly as new relevant information becomes available. Financial theorists have identified three levels of informational efficiency that reflect what information is incorporated in stock prices. Identify the form of capital market efficiency under the efficient market hypothesis…
How do Financial Markets help the economy and how can it hurt the economy? Give examples
◦Do firms have any responsibilities to society at large? ◦Is stock price maximization good or bad for society? ◦Should firms behave ethically? Is stock price maximization the same as profit maximization?
The efficient markets hypothesis True or False: The efficient markets hypothesis holds only if all investors are rational. False True Almost all financial theory and decision models assume that the financial markets are efficient. The informational efficiency of financial markets determines the ability of investors to “beat” the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, they will react rapidly as new relevant information becomes available. Financial theorists have identified three levels of informational efficiency that reflect what information is incorporated in stock prices. Identify the form of capital market efficiency under the efficient market hypothesis described in the following statement: Current market prices reflect all information contained in past price movements. This statement is consistent with: Strong form efficiency Semistrong form efficiency Weak form efficiency…

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