Which of the following observations appear to indicate market inefficiency? Explain whether the observation appears to contradict
Question:
a. Tax-exempt municipal bonds offer lower pretax returns than taxable government bonds.
b. Managers make superior returns on their purchases of their company’s stock.
c. There is a positive relationship between the return on the market in one quarter and the change in aggregate profits in the next quarter.
d. There is disputed evidence that stocks that have appreciated unusually in the recent past continue to do so in the future.
e. The stock of an acquired firm tends to appreciate in the period before the merger announcement.
f. Stocks of companies with unexpectedly high earnings appear to offer high returns for several months after the earnings announcement.
g. Very risky stocks on average give higher returns than safe stocks.
Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...
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Related Book For
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
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