Share
Explore BrainMass

Knowing that both stock investing and Las-Vegas-style gambling do have elements of risk in them, how do you compare the two?

Need to answer in 2 -3 paragraphs using the following information.

You work for an investment firm and recently wrote a position article on your firm's approach to risk. The article now appears on your company's website. It has, interestingly enough, generated e-mailed responses from potential clients and your firm is asking you to address some of their questions for a Frequently Asked Questions (FAQ) segment that will be posted to the site soon. Specifically, some of the respondents have compared investing in the stock market with gambling and state that even some of the financial press have advocated for "dart throwing"- meaning it does not really matter which stocks to choose as returns on all the stocks are similar. These respondents would like a response that further clarifies your firm's position regarding risk in light of these type of statements.

Knowing that both stock investing and Las-Vegas-style gambling do have elements of risk in them, how do you compare the two? Are there any similarities between them? What about dart throwing? In your response, your company has asked that you address these questions building upon the risk-return concepts you identified in the position piece you wrote for the firm.

Solution Preview

As you know we cannot technically write a 3 paragraph paper for you. However we can provide the information needed to successfully write your own paper. I will try to give you some background and information on the Perfect Information Theory and Random Walk.

1. Perfect Info--Also known as the efficient market hypothesis, is the theory that all given information is immediately reflected in the price of the stock. Meaning, the average individual would not be able to capitalize on the average information disseminated, because no sooner than the information is available, there will be an immediate reaction to buy the stock, driving the price up ...

Solution Summary

Here is just a sample of what you will find in the solution:

"I would say there are similarities to Vegas gambling, in that, there are certain things that many people know are true facts among a particular card game (i.e. Blackjack, Ace is 1 or 11), but many people do not know..."

$2.19