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Ch5Solutions - Chapter 5 Question Answers 5-3 A primary...

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Chapter 5 Question Answers 5-3 A primary market is the market in which corporations raise capital by issuing new securities. An initial public offering is a stock issue in which privately held firms go public. Therefore, an IPO would be an example of a primary market transaction. 5-9 The three forms, or levels, of market efficiency are: weak-form efficiency, semistrong-form efficiency, and strong-form efficiency. The weak form of the EMH states that all information contained in past stock price movements is fully reflected in current market prices. The semistrong form of the EMH states that current market prices reflect all publicly available information. The strong form of the EMH states that current market prices reflect all pertinent information, whether publicly available or privately held. 5-10 If the market is semistrong-form efficient and the company announces a 1% increase when investors had expected it to announce a 10% earnings increase, you would expect the stock’s price to fall because the earnings increase was less than
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This note was uploaded on 03/02/2011 for the course BMGT 340 taught by Professor White during the Spring '08 term at Maryland.

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