Chapter12solutions

Chapter12solutions - CHAPTER 12 SOME LESSONS FROM CAPITAL...

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Unformatted text preview: CHAPTER 12 SOME LESSONS FROM CAPITAL MARKET HISTORY Answers to Concepts Review and Critical Thinking Questions 1. They all wish they had! Since they didnt, it must have been the case that the stellar performance was not foreseeable, at least not by most. 2. As in the previous question, its easy to see after the fact that the investment was terrible, but it probably wasnt so easy ahead of time. 3. No, stocks are riskier. Some investors are highly risk averse, and the extra possible return doesnt attract them relative to the extra risk. 5. The market is not weak form efficient. 6. Yes, historical information is also public information; weak form efficiency is a subset of semi-strong form efficiency. 9. The EMH only says, within the bounds of increasingly strong assumptions about the information processing of investors, that assets are fairly priced. An implication of this is that, on average, the typical market participant cannot earn excessive profits from a particular trading strategy. However, that typical market participant cannot earn excessive profits from a particular trading strategy....
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