Question 1

________ is the practice of examining patterns and trends in historical stock prices.

Accepted Answer

Technical analysis is the practice of examining patterns and trends in historical stock prices to try and predict future price movements. Fundamental analysis involves looking at the financial health and performance of a company to determine its intrinsic value. Event studying is the analysis of how a particular event or news announcement affects a company's stock price. Insider trading involves trading on non-public information and is illegal.

Question 2

A company that you are following in anticipation of making an investment therein has just announced an unexpected dividend increase.You believe that you have one week to purchase the stock before the market price increases in reaction to the news.This behavior PROVES that the market is at least ________ form efficient.

Accepted Answer

The answer of A company that you are following in...

Question 3

Empirical evidence supports the notion that U.S.financial markets are generally ________ form efficient.

Accepted Answer

Empirical evidence suggests that U.S. financial markets are semi-strong form efficient, meaning that all publicly available information is already reflected in stock prices, making it difficult to achieve consistently higher returns.

Question 4

Despite relatively high first-day returns for U.S.IPOs,on average IPOs tend to underperform relative to the market in the first three to five years following their issuance.

Accepted Answer

It is true that on average, IPOs tend to underperform relative to the market in the first three to five years following their issuance, despite relatively high first-day returns. This is a well-documented phenomenon in finance literature.

Question 5

Private placements of debt issues are more common than private placements of equities.

Accepted Answer

Private placements of debt issues are typically easier to negotiate and carry less risk than equity placements, making them more popular for businesses looking to raise capital.

Question 6

A firm's stock price tends to decline on the firm's announcement of a seasoned equity offering.

Accepted Answer

This is because the announcement of a seasoned equity offering typically means that the firm is diluting the value of its existing shares by issuing new shares, which can lead to a decrease in demand for the company's stock and a subsequent drop in share price.

Question 7

Identify and define the three forms of financial market efficiency.If we could prove that insider trading could not exist in the market place,what level of efficiency would the market have obtained? Why?

Accepted Answer

The answer of Identify and define the three forms of...

Question 8

If a financial market is semi-strong form efficient,then it must also be at least weak-form efficient.

Accepted Answer

If a market is semi-strong form efficient, it means all publicly available information is already reflected in the market price. This includes information used in weak-form efficiency (past prices and trading volumes) as well as information used in semi-strong efficiency (publicly available news, financial statements, etc.). Therefore, a market that is semi-strong form efficient must also be weak-form efficient.

Question 9

Markets are said to be efficient if the prices of securities fully and immediately reflect all relevant information.

Accepted Answer

This is the definition of the efficient market hypothesis. It suggests that it is impossible to consistently achieve above-average returns by using insider or publicly available information, as any new information is quickly incorporated into the price of securities.

Question 10

List and describe the three methods used to distribute shares in an IPO.

Accepted Answer

The answer of List and describe the three methods used...

Question 11

In the last 50 years it has been far more common for U.S.IPOs to suffer negative first-day returns on average.

Accepted Answer

On average, U.S. IPOs have experienced positive first-day returns, often referred to as the "IPO pop," where shares end their first day of trading higher than the IPO price.

Question 12

The volume of venture capital activities tends to INCREASE in the years following an economic crisis.For instance,in the years following 2000 and 2008 the number of deals increased.

Accepted Answer

The answer of The volume of venture capital activities tends...

Question 13

Equities are more commonly issued as public offerings than as private offerings.

Accepted Answer

Equities are typically issued through initial public offerings (IPOs) to the public market, rather than private placements. Private offerings are generally reserved for accredited investors and institutional investors, whereas public offerings allow anyone to purchase shares in the company.

Question 14

Roger has been following a stock chart for TechMart Inc.and believes he has detected a pattern that he can use to earn abnormally large returns.If this is true he has demonstrated a violation of which form of market efficiency?

Accepted Answer

The answer of Roger has been following a stock chart...

Quiz 9: Overview of Capital Markets: Long-Term Financing Instruments