Reference no: EM132794317
Respond to each of the following comments by
a) Judging whether they are correct or not (selecting the correct type of strategy for question)
b) Give reason/s for your answer in a)
1. If markets are at least weak form efficient, analysing the pattern of historical prices and look for a trend or analysing publicly available financial reports can both help investors to earn abnormal returns.
2. If CEOs and Board of directors in the firm could not earn better returns compared to normal investors, this implies that the market is neither weak nor semi-strong efficient;
3. When active managed fund performs worse than passively managed fund (after taking into account the fees), the market is semi-strong efficient.
4. Lara uses put-call ratio to gauge the overall sentiment in the Australian equity market. Based on the current put-call ratio of 1.12, Lara purchases stocks in the market. What is the best terminology to describe Lara's strategy (i.e. contrarian or momentum) and explain your answers?
5. Assume that a company announces an unexpected large cash dividend to its shareholders. In an efficient market without information leakage, one might expect an abnormal price change at the announcement.
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