8. (A) True/False Explain: According to the basic stock valuation model, the value an investor assigns...

(A) True/False Explain: According to the basic stock valuation model, the value an investor assigns to a share of stock is dependent upon the length of time the investor plans to hold the stock.

(B) True/False Explain: When markets exhibit semi-strong form efficiency, balance sheet information and other public information can be used to help forecast prices/returns, however past prices will be of no help.

(C) True/False Explain: Many analysts correctly predicted that the stock market would decline in the first half of 2001; this violates semi-strong form efficiency.

Solutions

Expert Solution

(a)

FALSE

According to the basic stock valuation model, the value an investor assigns to a share of stock is NOT dependent upon the length of time the investor plans to hold the stock. it depends on the performance of the stock with respect to several other market market related factors.

(b)

FALSE

The semi-strong form efficiency theory follows the belief that because all information that is public is used in the calculation of a stock's current price, investors cannot utilize either technical or fundamental analysis to gain higher returns in the market.

Those who subscribe to this version of the theory believe that only information that is not readily available to the public can help investors boost their returns to a performance level above that of the general market.

(c)

TRUE

Efficient Market Hypothesis(EMH) is influential throughout financial research, but can fall short in application.EMH fails to explain market anomalies, including speculative bubbles and excess volatility

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

We use the dividend valuation model to value the price of the stock. As an investor...

We use the dividend valuation model to value the price of the stock. As an investor how do you get value by investing in a stock? Why does the stock valuation technique discussed in the module making sense to you or why not? What about the stock you invested never paid a dividend?

Basic Stock Valuation: Dividend Growth Model The value of a share of common stock depends on...

Basic Stock Valuation: Dividend Growth Model The value of a share of common stock depends on the cash flows it is expected to provide, and those flows consist of the dividends the investor receives each year while holding the stock and the price the investor receives when the stock is sold. The final price includes the original price paid plus an expected capital gain. The actions of themarginal investor determine the equilibrium stock price. Market equilibrium occurs when the stock's...

true or false In the context of the adjusted present value (APV) model of firm valuation,...

true or false In the context of the adjusted present value (APV) model of firm valuation, one major assumption is that firms will have a fixed level of debt in the future. The business with a net present value (NPV) of a firm equal to $0 is an example of a fairly valued business. (All else equal.) A company forecast to have negative economic value added (EVA) forever, will be trading at EV/Capital ratio that is smaller than one. (All...

12. 3: Basic Stock Valuation: Free Cash Flow Valuation Model Basic Stock Valuation: Free Cash Flow...

12. 3: Basic Stock Valuation: Free Cash Flow Valuation Model Basic Stock Valuation: Free Cash Flow Valuation Model The recognition that dividends are dependent on earnings, so a reliable dividend forecast is based on an underlying forecast of the firm's future sales, costs and capital requirements, has led to an alternative stock valuation approach, known as the free cash flow valuation model. The market value of a firm is equal to the present value of its expected future free cash...

true or false and explain. thanks in advance. 1. According to the dividend discount model, the...

true or false and explain. thanks in advance. 1. According to the dividend discount model, the value an investor assigns to a share of stock is dependent upon the length of time the investor plans to hold the stock. 2. If the yield to maturity of a bond is greater then It's coupon rate, the market value of the bond will always be below its par value. 3. the weighted average cost of capital reflects the average cost of the...

State whether the following statement is true or false and explain: According to the IS/LM model,...

State whether the following statement is true or false and explain: According to the IS/LM model, an equal increase in government spending and taxes by $1bn cannot raise GDP by more than $1bn.

Basic Stock Valuation: Free Cash Flow Valuation Model The recognition that dividends are dependent on earnings,...

Basic Stock Valuation: Free Cash Flow Valuation Model The recognition that dividends are dependent on earnings, so a reliable dividend forecast is based on an underlying forecast of the firm's future sales, costs and capital requirements, has led to an alternative stock valuation approach, known as the free cash flow valuation model. The market value of a firm is equal to the present value of its expected future free cash flows: Free cash flows are generally forecasted for 5 to...

True or False. Explain clearly WHY it is true or false 1. In the Neo-Classical model,...

True or False. Explain clearly WHY it is true or false 1. In the Neo-Classical model, when both countries are less willing to trade, this will always lead to the same equilibrium level for the terms of trade. 2. Differences in relative factor endowments among countries cannot explain Intra-Industry Trade. 3. Economic growth always leads to increased trade flows.

Answer True or False 5. According to the trade model of David Ricardo, the direction...

Answer True or False 5. According to the trade model of David Ricardo, the direction of trade is determined by absolute advantage. 6. Adam Smith and David Ricardo reasoned that in a world of two countries, at least one country will be worse off as the result of trade. 7. A country with high wages can export to a country with low wages, given sufficiently high labor productivity in the exporting country. 8. According to the...

true or false Censoring a message is a characteristic of filtering. According to Fielder's contingency model,...

true or false Censoring a message is a characteristic of filtering. According to Fielder's contingency model, task-oriented leaders are always most likely to be succesful.

Subjects