CHAPTER 10 SOME LESSONS FROM CAPITAL MARKET HISTORY Answers to Concepts Review and Critical Thinking Questions1. They all wish they had! Since they didn’t, it must have been the case that the stellar performance wasnot foreseeable, at least not by most. 2. As in the previous question, it’s easy to see after the fact that the investment was terrible, but itprobably wasn’t so easy ahead of time. 3. No, stocks are riskier. Some investors are highly risk averse, and the extra possible return doesn’tattract them relative to the extra risk. 4. On average, the only return that is earned is the required return—investors buy assets with returns inexcess of the required return (positive NPV), bidding up the price and thus causing the return to fall tothe required return (zero NPV); investors sell assets with returns less than the required return (negativeNPV), driving the price lower and thus the causing the return to rise to the required return (zero NPV). 5.
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