Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
19 Cards in this Set
- Front
- Back
|
If market is fully efficient, what is impact on active and passive investing strategies? |
Active cannot earn positive risk-adjusted returns consistently and investors should therefore use a passive strategy |
|
|
Intrinsic Value |
Price that investors with full knowledge of the asset's characteristics would place on asset |
|
|
What makes market more efficient? |
Large numbers of market participants and greater information availability |
|
|
What makes markets less efficient? |
1. Impediments to arbitrage and short selling 2. High costs of trading and gathering information |
|
|
Weak Form of Efficient Markets Hypothesis (EMH) |
Security prices fully reflect all past price and volume information |
|
|
Semi-Strong Form of Efficient Markets Hypothesis |
Security prices fully reflect all publicly available information |
|
|
Strong Form of Efficient Markets Hypothesis |
Security prices fully reflect all private and public information |
|
|
If markets are weak form efficient... |
Technical analysis does not consistently result in abnormal profits |
|
|
If markets are semi-strong form efficient... |
Fundamental analysis does not consistently result in abnormal profits |
|
|
If markets are strong-form efficient... |
Active investment management does not consistently result in abnormal profits |
|
|
Market anomaly |
Something that deviates from EMH *most evidence suggests anomalies are not violations of market efficiency but are due to methodologies used in anomal research, such as data mining |
|
|
January Effect |
Small firm stock returns are higher at the beg of Jan |
|
|
Overreaction Anomalies |
Stock returns subsequently reverse |
|
|
Momentum Anomalies |
High short-term returns are followed by continued high returns |
|
|
Size Effect Anomaly and Value Effect |
Small-cap stocks outperform large-cap stocks and value stocks outperform growth stocks |
|
|
Loss Aversion
|
Dislike a loss more than they like a gain |
|
|
Investor Overconfidence |
Overestimate ability to analyze security info |
|
|
Herding |
Investors act in concert on same side of market by mimicking investment actions of others |
|
|
Information Cascade
|
Investors mimic decisions of others |
