Fall 2011 ADMS 3531 Assignment2 Sol, revised Dec 3

Fall 2011 ADMS 3531 Assignment2 Sol, revised Dec 3 -...

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AP/ADMS 3531, Fall 2011 Professors Domian and Yildirim Homework Assignment #2 This assignment consists of 6 questions beginning on the next page. Your answers are due in class in the eleventh week of the semester (see course outline), in the section for which you are registered. You are welcome to submit your assignment early, to the Admin Studies General Office (282 Atkinson). This is not a group project! Work by yourself, and your answers must be handwritten. Please keep a photocopy of your answers. Solutions will be posted on the class website on Thursday December 1. Your photocopy will allow you to check your work, and will also serve as proof that you handed in the assignment. It is hoped, but not guaranteed, that the assignments will be marked and available for your pick-up before the final exam. This assignment will be graded on a 100-point scale, and will be worth 5% of your course grade. Please sign the personal work statement in the box below and include it with your assignment. (It is recommended that you print out this entire page and staple it in front of your answers.) Personal Work Statement I, the undersigned: warrant that the work submitted herein is my work and not the work of others acknowledge that I have read and understood the Senate Policy on Academic Honesty (see http://www.yorku.ca/secretariat/policies/document.php?document=69 ) acknowledge that it is a breach of the University Regulations to give or receive unauthorized assistance on a graded piece of work Name (typed or printed) York Student # Signature Please check your section: Section A, Tuesday 7 pm, Professor Domian Section B, Thursday 2.30 pm, Professor Yildirim Guidelines for rounding: If you are using percents, for example 1.23%, then you should use two decimal places for your calculations. If the same number is converted to decimal form, as 0.0123, then use four decimal places throughout your calculations. Dollar amounts, for example a share price 1
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of $12.34, should be rounded to the nearest cent. However, if there are no pennies, such as 100 shares worth $12 per share, then use integer dollar amounts. 1. Please explain if the semi-strong form of the EMH is violated in each of the following cases. a) You acquired newly developed expensive software to perform technical analyses using historical data. The new software actually has some predictive power that enables you to find stocks with risk-adjusted returns that are consistently 1.5% above the market return. (4 points) Beating the market based on historical data would violate the weak form of EMH. If the weak form is violated, then the semi-strong form is violated too. However, to be complete you need to distinguish net versus gross profits. As a rational investor, you should ask the cost of acquiring needed information, and the question describes the software as “expensive”. If the computer costs exceed the excess 1.5 percent profits from the stocks, you are actually earning worse than normal returns. If the total cost
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This note was uploaded on 12/15/2011 for the course ADMS 3530 taught by Professor Unknown during the Spring '09 term at York University.

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Fall 2011 ADMS 3531 Assignment2 Sol, revised Dec 3 -...

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