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

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

The global financial crisis lead to a decline in stock prices because

One of the assumptions of the Gordon Growth Model is that dividends will continue growing at ________ rate.

________ 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.

What rights does ownership interest give stockholders?

If a forecast made using all available information is NOT perfectly accurate,then it is

Loss aversion can explain why very little ________ actually takes place in the securities market.

If a mutual fund outperforms the market in one period,evidence suggests that this fund is

Increased uncertainty resulting from the global financial crisis ________ the required return on investment in equity.

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

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

The efficient markets hypothesis suggests that if an unexploited profit opportunity arises in an efficient market

When we describe stock prices as following a random walk,we mean that future changes in stock prices are

You read a story in the newspaper announcing the proposed merger of Dell Computer and Gateway.The merger is expected to greatly increase Gateway's profitability.If you decide to invest in Gateway stock,you can expect to earn

In the Gordon Growth Model,the growth rate is assumed to be ________ the required return on equity.

In asset markets,an asset's price is

If a forecast is made using all available information,then economists say that the expectation formation is