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3 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]3 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.

<em>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.</em>

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.

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3 years ago

Read 2 more answers

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MatroZZZ [7]

Diego applying the systems model of change as a diagnostic framework

<h3><u>Explanation:</u></h3>

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2 years ago

An increase in the costs of resources or inputs of production would shift the ________.

nadya68 [22]

Answer:

C. short-run aggregate supply curve leftward

Explanation:

When the cost of production or inputs of production increase the short run supply curve shifts left because the producers are now willing to sell less at the same price because it is more expensive for them to produce, so at every price the production decreases because of which the supply curve shifts left. The long run supply curve isn't affected by an increase in costs of resources because it is the potential of the economy and an increase in costs of does not change the potential of the economy.

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2 years ago

Kier Company issued $660,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 5-year term to mat

yuradex [85]

Answer:

Interest Expense $39,600

Cash Flow from Operating Activities $39,600

Explanation:

Payment of Interest Expense is the cash expense paid during the year which is deducted from the operating profit in the calculation of net income which is used to determine the cash flow from operating activities.

Interest on the Bond = $660,000 x 6% = $39,600

At the time of payment Journal Entry will be as follow

Dr. Interest Expense $39,600

Cr. Cash $39,600

As the cash is paid against the operating activities.

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3 years ago

Imagine that you are a parent, and your child is going to college in 4 years. Tuition fees amount to $16,000 a year for each of

LiRa [457]

Answer:

lump sum money= $52653

Explanation:

Giving the following information:

Your child is going to college in 4 years.

Tuition fees amount to $16,000 a year for each of the 4 years.

You plan on depositing a lump sum of money today in a bank account paying 5% interest a year.

The first tuition fee payment you make will be 4 years from now.

FV= 16000*4= $64000

n= 4 years

i= 0.05

We need to find the annual payments:

PV= FV/(1+i)^n

PV= 64000/1.05^4= $52653

7 0

2 years ago