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

Sometimes one observes that the price of a company's stock falls after the announcement of favorable earnings. This phenomenon is

The efficient markets hypothesis suggests that investors

A change in perceived risk of a stock changes

In the Gordon growth model,a decrease in the required rate of return on equity

If expectations are formed adaptively,then people

Stock market crashes lead us to believe that

An expectation may fail to be rational if

If additional information is not used when forming an optimal forecast because it is not available at that time,then expectations are

People have a strong incentive to form rational expectations because

You have observed that the forecasts of an investment advisor consistently outperform the other reported forecasts. The efficient markets hypothesis says that future forecasts by this advisor

Using the Gordon growth formula,if D1 is $2.00,ke is 12% or 0.12,and g is 10% or 0.10,then the current stock price is

If during the past decade the average rate of monetary growth has been 5% and the average inflation rate has been 5%,everything else held constant,when the Federal Reserve announces that the new rate of monetary growth will be 10%,the adaptive expectation forecast of the inflation rate is

Using the Gordon growth model,if D1 is $.50,ke is 7%,and g is 5%,then the present value of the stock is

Tests used to rate the performance of rules developed in technical analysis conclude that technical analysis

The number and availability of discount brokers has grown rapidly since the mid-1970s. The efficient markets hypothesis predicts that people who use discount brokers

If future changes in stock prices are unpredictable,then we say that the stock prices follow a

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

In the generalized dividend model,a future sales price far in the future does not affect the current stock price because

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

A stock's price will fall if there is