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In: Business and Management

Submitted By jojojoury
Words 1309
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1. What are the determinants of assets demand? 1. Wealth, the total resources owned by the individual, including all assets 2. Expected return (the return expected over the next period) on one asset relative to alternative assets 3. Risk (the degree of uncertainty associated with the return) on one asset relative to alternative assets 4. Liquidity (the ease and speed with which an asset can be turned into cash) relative to alternative assets 2. What are the implications of efficient market hypothesis on the academic field? 1) It implies that in an efficient capital market, one investment is as good as any other because the securities’ prices are correct. 2) It implies that a security’s price reflects all available information about the intrinsic value of the security. 3) It implies that security prices can be used by managers of both financial and nonfinancial firms to assess their cost of capital (cost of financing their investments) accurately and hence that security prices can be used to help them make the correct decisions about whether a specific investment is worth making or not. 3. What are the favorable evidence that markets are efficient? 1. Investment analysts and mutual funds don't beat the market. 2. Stock prices reflect publicly available info: anticipated announcements don't affect stock price. 3. Stock prices and exchange rates close to random walk; if predictions of DP big, Rof > R* predictions of DP small. 4. Technical analysis does not outperform market.

4. What is the favorable evidence on EMH? (chapter 6) 1. Investment analysts and mutual funds don't beat the market. 2. Stock prices reflect publicly available info: anticipated announcements don't affect stock price. 3. Stock prices and exchange rates close to random walk; if predictions of DP big, Rof > R* predictions…...

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