All categories

4 years ago

Note whether the following phenomena would be consistent with or a violation of the efficient market hypothesis.

Business

1 answer:

denis-greek [22]4 years ago

4 0

Answer:

D) Stock prices of companies that announce increased earning in January tend to outperform the market in February.

Explanation:

The above is consistent with the Efficient Market Hypothesis. All others are a direct contravention.

The efficient market hypothesis (EMH), also known as the efficient market theory, is a hypothesis that states that the prices of shares contain all information and that consistent alpha generation is impossible.

According to the hypothesis, stocks always trade at their fair value on exchanges, making it impossible for investors to purchase undervalued stocks or sell stocks for inflated prices.

This means that it should not be possible to outperform the overall market through professional stock selection or market timing.

The only way according to EMH that an investor can obtain better returns is by purchasing riskier investments.

By implication, this also means that it is not possible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information.

You would note that in the option D, earning (which is a key driver for demand of stock) is announced in one month. The natural reaction would be for the demand for that stock to surge in the next month.

You might be interested in

Amazon must carry inventory to meet demand from its customers. If the item is not in inventory the customer may go elsewhere to

pishuonlain [190]

Answer:

all of the above

Explanation:

::::::::

3 0

3 years ago

Mark Johnson invests a fixed percentage of his salary at the end of each year. This year he invested $1500 For the next 5 years,

meriva

Answer:

Mark Johnson's investment would worth $ 13,223.95 at 8%,$ 12,338.93

at 5% and $ 11,784.66 at 3%

Explanation:

In calculating the worth of the investments at different rates of interest I adopted the future value approach as contained in the attached.

Download xlsx

5 0

3 years ago

The Moore Corporation had operating income (EBIT) of $700,000. The company's depreciation expense is $140,000. Moore is 100% equ

Nastasia [14]

Answer:

The net cash flow is $560,000

Explanation:

The computation of the net cash flow is shown below:o

= Operating income + depreciation - tax expense

= $700,000 + $140,000 - $280,000

= $560,000

The tax expense is calculated by

= Operating income × tax rate

= $700,000 × 40%

= $280,000

For computing the net cash flow, we have to add the depreciation expense and deduct the income tax expense.

4 0

4 years ago

A company uses a process cost accounting system. The following information is available regarding direct labor for the current y

Serhud [2]

Question:

A company uses a process cost accounting system and the weighted average method for inventory costs. The following information is available regarding direct labor for the current year:

goods in process, January 1 5,500 units 80% complete

goods in process December 31 8,800 units, 40 complete

units completed and transferred 46,900 units

to finished goods

direct labor costs during the year $266,300

(a) Calculate the equivalent units of production for direct labor for the year.

(b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).

Answer:

Total equivalent unit= 41,040 units

Cost per equivalent units=$ 6.48

Explanation:

Equivalent units

Item Units Equivalent unit

Transferred out 46900× 80% = 37,520

Closing inventory 8,800 × 40% = 3,520

Total equivalent unit 41,040

Cost per equivalent units

Cost per equivalent units = Total labour cost/ total equivalent unit

= $266,300 / 41,040 units =$ 6.5

Cost per equivalent units=$ 6.5

5 0

3 years ago

A credit report is a _____.

svp [43]

A credit report is a detailed report of an individual's credit history.

5 0

4 years ago

Read 2 more answers