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IgorLugansk [536]
3 years ago
11

Suppose you find that prices of stocks before large dividend increases show on average consistently positive abnormal returns. i

s this a violation of the emh? yes no
Business
2 answers:
bearhunter [10]3 years ago
8 0

Answer: No

Explanation:

EMH an acronym for Efficient market Hypothesis is a theory that security prices reflects all available information making it impossible to beat the market by taking undue advantages.

The information provided in the scenario is not detailed enough to give an investor the opportunity to earn abnormal returns .It just show that good performance leads to higher dividends as better performing stocks pay higher dividends

RideAnS [48]3 years ago
5 0

Answer:

NO

Explanation:

The efficient market hypothesis (EMH) theory states that the market price of securities reflects all the public information regarding them, e.g. expected earnings, etc. One of the basic premises of EMH is that it is useless for investors to pick individual stocks to try to obtain higher than normal results. It places a lot of emphasis on the market as a whole, instead of individual stocks.

If the prices of stocks vary a lot just before dividends increase, it actually reflects and supports EMH. Since the market expects an increase in dividends, the price of stocks will rise, but generally stock prices will rise too much and must then be adjusted to reflect the real value. Also, in the short run prices will appear to be varying randomly, but that happens because the inflow of information is not constant and expectations will vary. But on the long run, the prices will adjust to the correct information.

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Alla [95]

Owner withdrawals cause a decrease in owner's equity and are recorded directly within the owner's withdrawal.

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6 0
2 years ago
When a company uses the allowance method to measure bad​ debts, ________.
Phoenix [80]
<span>When a company uses the allowance method to measure bad​ debts, </span><span>the amount of bad debts expense is estimated at the end of the accounting period. 

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6 0
3 years ago
A company currently sells products in the United States and is considering expanding to China or Vietnam. Expanding won't impact
mariarad [96]

Answer: Company should not expand to either.

Explanation:

Find the expected values of expanding to either country and pick the country with the highest expected value:

China:

= ∑(Probability of outcome * Outcome)

= (20% * 2,000,000) + (30% * 1,000,000) + (50% * -2,000,000)

= -$300,000

Vietnam:

= (70% * 1,000,000) + (30% * -2,500,000)

= -$50,000

<em>Both countries result in an expected loss so company should not expand to either of them. </em>

3 0
3 years ago
What was required to make plantation cash crops a source of wealth?
Kamila [148]
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6 0
3 years ago
describe how adding a risk-free security to modern portfolio theory allows investors to do better than the efficient frontier. A
kondaur [170]

Answer: Modern portfolio theory takes this idea even further. It suggests that combining a stock portfolio that sits on the efficient frontier with a risk-free asset, the purchase of which is funded by borrowing, can actually increase returns beyond the efficient frontier.

Risk premium is defined as excess return over risk free rate by taking extra risk. A risk-free asset has zero risk, so risk premium on these assets is zero. As risk level of investment increases, risk premium on investment also increases.

The market risk premium is the difference between the expected return on a market portfolio and the risk-free rate. The market risk premium is equal to the slope of the security market line (SML), a graphical representation of the capital asset pricing model (CAPM). CAPM measures required rate of return on equity investments, and it is an important element of modern portfolio theory and discounted cash flow valuation.

Explanation:

7 0
3 years ago
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