Explain why market prices will always converge to their fundamental value even when we disregard the...

Explain why market prices will always converge to their fundamental value even when we disregard the efficient market hypothesis.

Expert Solution

Market price of a company is always determined by the fundamentals of the company and even if we disregard the theory of the Efficient market hypothesis, the market price of a company will always be determined by the shareholders through regular events and news about the company and different micro data, so, market price of a company is always decided by relevant movement in its fundamentals .

It is often seen that the companies are always dealing with various fundamental changes in their structure as for example, they will be reporting the quarterly earnings and their share price always reflecting their earnings as as this is is affecting the overall structure of the company in the long run, so there would be buying or selling on these event-based news of the company.

There is micro factors of the company playing an important role in movements of its share price because various participants in market always tend to re adjust the price of the company to its actual fundamental value because markets are always trying to discount the actual scenario.

jeff jeffy answered 1 year ago

why can we disregard the concentration of sodium hydroxide in this experiment even though we are...

why can we disregard the concentration of sodium hydroxide in this experiment even though we are measuring thr rate of the reaction between NaOH and crystal violet?

Explain why prices are always flexible.

Why does this code not work even when typing in the correct product code? It always...

Why does this code not work even when typing in the correct product code? It always gives me the error message even though im typing one of the 3 correct product codes. String[] product_code= new String[3]; String[] product_name= new String[3]; // String[] product_description = new String[3]; int[] quantity = new int[3]; double[] price = new double[3]; double[] itemTotal = new double[3]; double subTotal = 0, salesTax, total; //getting all the needed inputs for(int i = 0; i < 3;...

Explain in detail why in Pure Competition firms will always break even, use the economic profit...

Explain in detail why in Pure Competition firms will always break even, use the economic profit and shut down situation to explain why firms will break even. Please include the graphs to explain these concepts.

Explain why we can have "even" and "odd" half range expansions.

Explain why we expect the government to run deficits during a recession even if there is...

Explain why we expect the government to run deficits during a recession even if there is no new fiscal policy enacted. (Make sure you talk about both the spending reason and the tax reason for this!)

Why is it that a profit-maximizing businessman would always raise prices when facing an inelastic demand curve, but might or might not raise prices when facing an elastic demand curve?

Why is it that a profit-maximizing businessman would always raise prices when facing an inelastic demand curve, but might or might not raise prices when facing an elastic demand curve? Explain and justify your answers in detail by covering the inelastic and elastic demand curves. Make sure you define the meaning of the elastic and inelastic demands.

1a) Explain why we reject the null hypothesis when the p-value is less than the level...

1a) Explain why we reject the null hypothesis when the p-value is less than the level of significance? b) Explain to someone unfamiliar with statistics how to tell whether a statistical test is left, right, or two tailed. Explain what to look for in the wording of a hypothesis test and with the alternate hypothesis. c) Why can we never truly accept the null hypothesis?

What is the difference between market price and fundamental value (intrinsic value) of a stock?

Why can we never expect frictional unemployment to be zero even when the economy is strong?

Question