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Price Changes, Efficient Markets and Capital Decisions

Identify the following statements are True (T) or False (F).
Provide brief explanation when necessary
1. Tests have shown that there is almost perfect negative correlation between successive price changes.
2. The semi-strong form of the efficient-market hypothesis states that prices reflect all publicly available information.
3. In efficient markets the expected return on each stock is the same.

Comment briefly the statement

"Unlike American firms, which are always being pressurized by their shareholders to increase dividends, Japanese company pay out a much smaller proportion of earnings and so enjoy a lower cost of capital"

Solution Summary

This solution identifies if the statement is true or false and gives an explanation of the correct answer. It discusses successive price changes, efficient-market hypothesis, expected return on each stock and also the benefits of the Japanese having a lower cost of capital compared to the Americans. All references used are included.