49) If stock prices follow a random walk, it means that stock prices are just as likely to rise as to fallat any given time.TrueFalse

The stock price is the current price that a share of stock is trading for on the market. The price…

Answered: 49) If stock prices follow a random…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter31: Capital Markets

Section: Chapter Questions

Problem 11E

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Similar questions

Why is it hand to forecast future movements in stock prices?
Explain why a financial investor in stocks cannot earn high capital gains simply by buying companies with a demonstrated record of high profits.
What are some reasons why the investment strategy of a 30-year-old might differ flow the investment strategy of a 65-year-old?
Define the term Expected return on a risky asset?
Suppose that you are asked to forecast future stock prices for Tesla, so you proceed tocollect all available information. The day you announce your forecast, Toyota announce abrand-new plan to merge and reshape the structure of the electric carts industry. Wouldyour forecast still be considered optimal? Discuss.
The Beta of a stock is very popular concept in CAPM. One decade ago, a lot of researchers have pointed out a theory (Namely theory Beta ) the stocks with low empirically estimated historical beta tend to outperform stocks with high historical beta. Could you please use the stocks in SSE 50 to demonstrate whether the theory Beta still applies to current stock market?
“If stock prices did not follow a random walk, therewould be unexploited profit opportunities in themarket.” Is this statement true, false, or uncertain?Explain your answer.
7. Even if we can't exactly establish the actual cost of a stock out, in most cases we can still determine an appropriate level for safety stock. True False
You own a stock portfolio Invested 16 percent in Stock Q, 24 percent In Stock R, 36 percent In Stock S, and 24 percent In Stock T. The betas for these four stocks are .94, 1.00, 1.40, and 1.85, respectively. What Is the portfolio beta? Note: Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Portfolio beta
Suppose that all investors have the disposition effect. A new stock has just been issued at a price of $61, so all investors in this stock purchased the stock today. A year from now the stock will be taken over, for a price of $73 or $49 depending on the news that comes out over the year. The stock will pay no dividends. Investors will sell the stock whenever the price goes up by more than 10%. a. Suppose good news comes out in 6 months (implying the takeover offer will be $73). What equilibrium price will the stock trade for after the news comes out, that is, the price that equates supply and demand? b. Assume that you are the only investor that does not suffer from the disposition effect and your trades are small enough to not affect prices. Without knowing what will actually transpire, what trading strategy would you instruct your broker to follow? .... a. Suppose good news comes out in 6 months (implying the takeover offer will be $73). What equilibrium price will the stock trade…
Assume that an economy can have four states: Severe recession, Mild recession, Normal growth, Boom. Probability of each scenario, stock and bond annual returns in that scenario are provided below. Let's also assume that you are creating a portfolio with 65% stocks and 35% bonds. Economy State Severe recession Probability 0.20 Stock Return (%) Bond Return (%) -37 -9 Mild recession 0.30 -11 15 Normal growth 0.40 14 8 Boom 0.10 30 -5 How much is the annual standard deviation of Stock returns? Enter your answer in the following format: 0.1234 Hint: Answer is between 0.1938 and 0.2373
3) Stock, Stock Options, and Restricted Stock are the market based unconditional compensations. Select an alternative True False

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49) If stock prices follow a random walk, it means that stock prices are just as likely to rise as to fall at any given time. True False