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

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

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

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

According to rational expectations theory,forecast errors of expectations

The efficient markets hypothesis indicates that investors

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

________ is the field of study that applies concepts from social sciences such as psychology and sociology to help understand the behavior of securities prices.

If a market participant believes that a stock price is irrationally high,they may try to borrow stock from brokers to sell in the market and then make a profit by buying the stock back again after the stock falls in price.This practice is called

Using the one-period valuation model,assuming a year-end dividend of $1.00,an expected sales price of $100,and a required rate of return of 5%,the current price of the stock would be

Studies of mutual fund performance indicate that mutual funds that outperformed the market in one time period usually

Periodic payments of net earnings to shareholders are known as

In asset markets,an asset's price is

The advantage of a "buy-and-hold strategy" is that

In the one-period valuation model,an increase in the required return on investments in equity

According to the efficient markets hypothesis,purchasing the reports of financial analysts

The value of any investment is found by computing the

People have a strong incentive to form rational expectations because

If market participants notice that a variable behaves differently now than in the past,then,according to rational expectations theory,we can expect market participants to

If expectations are formed adaptively,then people

Which of the following accurately summarize the empirical evidence about technical analysis?