I appreciate your response to the following....... a. \"In efficient markets the

Question

I appreciate your response to the following.......

a. "In efficient markets the expected return on each stock is the same". Is it a true statement? Please explain biefly why or why not.

b. Is it true that when making a dividend decision, managers should primarily be concerned about what signal it conveys to the market. why or why not. Please briefly explain.

c. Because of differing market imperfections, financing decisions (related to the right side of the balancesheet) are less easily reversed than investment decisions (related to left side of balance sheet. Is this true? briefly explain why or why not.

d. Is it true that the semi-strong form of the efficient market hypothesis states that prices reflect all publicly available information? Explain why or why nor.

Thanks in advance.

Explanation / Answer

Q: a. "In efficient markets the expected return on each stock is the same". Is it a true statement? Please explain biefly why or why not.

Answer:

TRUE. In an efficient market, the expected returns from any investment will be consistent with the risk of that investment over the long term, though there may be deviations from these expected returns in the short term.

b. Is it true that when making a dividend decision, managers should primarily be concerned about what signal it conveys to the market. why or why not. Please briefly explain.

Answer:

TRUE. Most companies pay relatively consistent dividends from one year to the next and managers tend to prefer to pay a steadily increasing dividend rather than paying a dividend that fluctuates dramatically from one year to the next. These criticisms have led to the development of other models that seek to explain the dividend decision.

c. Because of differing market imperfections, financing decisions (related to the right side of the balancesheet) are less easily reversed than investment decisions (related to left side of balance sheet. Is this true? briefly explain why or why not.

Answer:

FALSE.

d. Is it true that the semi-strong form of the efficient market hypothesis states that prices reflect all publicly available information? Explain why or why nor.

Answer:

FALSE. In efficient markets, prices reflect all available information. Thus, prices will fluctuate whenever new information becomes available.

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