Category: Risks And Diversification & Efficient Market Hypothesis

A. shares tend to be overvalued
B. the stock market is informationally efficient so share prices should follow a random walk
C. All of these answers
D. fundamental analysis is a valuable tool for increasing one’s returns from investing in shares

A. future value
B. fair value
C. present value
D. compound value
E. beginning value

A. increases the present value of future returns from investment and increases investment
B. decreases the present value of future return from investment and decreases investment
C. decreases the present value of future returns from investment and increase investment
D. increases the present value of future returns from investment and decreases investment

A. reduce aggregate risk
B. eliminate all risk
C. increase the standard deviation of the portfolio’s return
D. reduce idiosyncratic risk

A. None of these answers
B. An increase in expected dividends
C. A reduction in aggregate risk
D. A reduction in the interest rate
E. All of these answers

A. stock markets tend to be inefficient
B. all of these answers
C. index funds are able to buy undervalued stocks
D. actively managed funds trade more often and charge fees for their alleged expertise

A. during periods of extreme pessimism because so many stocks become undervalued
B. only when people are irrational
C. when stocks are fairly valued
D. because rational people may buy an overvalued share if they think they can sell it to someone for even more at a later date

A. shares are overvalued
B. people behave irrationally when choosing shares
C. markets reflect all available information in a rational way
D. shares are undervalued