Exam 7: The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

When Happy Feet Corporation announces that their fourth quarter earnings are up 10%,their stock price falls.This is consistent with the efficient markets hypothesis

A monetary expansion ________ stock prices due to a decrease in the ________ and an increase in the ________,everything else held constant.

Using the Gordon growth model,a stock's price will increase if

Information plays an important role in asset pricing because it allows the buyer to more accurately judge

In the one-period valuation model,the value of a share of stock today depends upon

In rational expectations theory,the term "optimal forecast" is essentially synonymous with

Which of the following types of information most likely allows the exploitation of a profit opportunity?

Psychologists have found that people tend to be ________ in their own judgments.

________ occurs when market participants observe returns on a security that are larger than what is justified by the characteristics of that security and take action to quickly eliminate the unexploited profit opportunity.

According to the efficient markets hypothesis,the current price of a financial security

For small investors,the best way to pursue a "buy and hold" strategy is to

The efficient markets hypothesis suggests that investors

Using the Gordon growth model,a stock's current price decreases when

If in an efficient market all prices are correct and reflect market fundamentals,which of the following is a false statement?

To say that stock prices follow a "random walk" is to argue that stock prices

Evidence against market efficiency includes

The theory of rational expectations,when applied to financial markets,is known as

In the generalized dividend model,the current stock price is the sum of

What rights does ownership interest give stockholders?

Excessive volatility refers to the fact that