Purchase Solution

Price Changes, Efficient Markets and Capital Decisions

Not what you're looking for?

Ask Custom Question

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.

Question.2
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"

Purchase this Solution
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.

Solution provided by:
Umut Oltulu, MBA
Education
  • BSc, Dokuz Eylul University
  • MBA, Texas A&M University-Kingsville
Recent Feedback
  • "Thanks"
  • "Thanks"
  • "This is a great help...Thank you"
  • "Thanks for the advice!"
  • "Oh my gosh u are awesome... A++"
Purchase this Solution
Free BrainMass Quizzes
Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

View More Free Quizzes
Related BrainMass Solutions

  • The Value of an Efficient Market

    Managers will be motivated to take the decisions that maximize the share price and hence the shareholder wealth only when they know that their wealth maximizing decisions are accurately signaled to the market and gets incorporated in the share price.

  • Financial Markets

    The weak form maintains that share prices fully reflect all historical information and price changes. The semi-strong form maintains that share prices reflect all publicly available information.

  • Public Policy Structure

    Social surplus is maximized at the market clearing price. Ideal competitive markets maximize social surplus. These competitive markets produce Pareto efficient allocation of goods and services.

  • This post addresses the efficienct market hypothesis.

    If it were, they could base their decisions on the current market price and information that they are privy to, which would make the market highly inefficient.

  • Financial Term Definitions

    and the smaller the differences in price changes, the more efficient the market); (3) The market can absorb large dollar amounts of securities without destabilizing the prices.

  • Explaining Efficient Market Hypothesis

    The efficient market hypothesis, the random walk theory and the rational expectations hypothesis all suggest that stock markets are efficient. This means that at any time, a stock's price is the best available estimate of its true value.

  • Opinion on Efficient Market Hypothesis

    In my opinion today's financial markets are not efficient and the turmoil in the financial markets is just one example of why.

  • Financial Regulation in the US

    Step 2 Efficient capital market contributes to the efficiency in the market for goods and services because efficient markets allow the efficient firm to raise market in the capital markets.

  • Finance Tutorial: Efficient Markets and Informational Asymmetry

    What problem can these asymmetries create for participants in the money and capital markets?

View More Related Solutions