Reference no: EM132925109

Question -

Q1) Analyze the following observations for market efficiency. Explain whether each one appears to contradict the weak, semi-strong, or the strong form of the efficient-market hypothesis (should analyze all observations).

a) In the last 12 months, the US's leading stock index was up +18.2%, while the big pharma Pfizer's stock fell slightly by -5.1%. An analyst pointed out that "The market is obviously mispricing Pfizer's role in the Covid-19 vaccination".

b) Volkswagen AG stock has risen by 7.1% over 5 trading days until March 12th, 2021. According to Nasdaq.com, "The rise was primarily seen after the company announced its first-ever 'Power Day' scheduled for March 15, 2021".

c) Looking at intraday stock data, on March 16th the stock of Volkswagen AG was up as much as 8.8%. The day after it increased +11.0%. This movement occurs after the announcement of Volkswagen's plan to rival Tesla for electric vehicle dominance, aiming for battery electric vehicles to be 50% of total company deliveries by 2030.

Q2) In November 2018, Unilever PLC announced a second phase of a share buyback program equivalent to an aggregate market value of €3.0 billion. Suppose that Unilever also had in place a stable policy of distributing cash dividends of €1.52 per share, paid quarterly. Considering 1.25 billion outstanding shares, a stock price of €48.0 and that Unilever will buy back shares immediately before distributing the cash dividend, compute:

a) the expected stock price;

b) the number of shares outstanding after the cash dividend.