Chapter 7: Q.24 (page 210)
Why does entry occur?
Entry occurs as a result of the industry's above-average profit margins.
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“If stock prices did not follow a random walk, there would be unexploited profit opportunities in the market.” Is this statement true, false, or uncertain? Explain your answer.
Suppose that in every last week of November stock prices go up by an average of . Would this constitute evidence in favor of or against the efficient market hypothesis?
The Internet is a great source of information on stock prices and stock price movements. Yahoo Finance is a great source for stock market data. Go to http://finance .yahoo.com and click on “Markets,” then “World Indices,” and then the DJI symbol to view current data on the Dow Jones Industrial Average. Click on the chart to manipulate the different variables. Change the time range and observe the stock trend over various intervals. Have stock prices been going up or down over the past day, week, three months, and year?
In the late s, as information technology advanced rapidly and the Internet was widely developed, U.S. stock markets soared, peaking in early . Later that year, these markets began to unwind and then crashed, with many commentators identifying the previous few years as a “stock market bubble.” How might it be possible for this episode to be a bubble but still adhere to the efficient market hypothesis?
What are the implications of behavioral finance?
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