Stutz031

Card Set Information

Author:
Anonymous
ID:
189849
Filename:
Stutz031
Updated:
2012-12-16 20:30:00
Tags:
Stutz031
Folders:

Description:
Chpt. 8 EMH
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user Anonymous on FreezingBlue Flashcards. What would you like to do?


  1. Efficient Market Hypothesis (EMH)
    hypothesis that prices of securities fully reflect available information about securities
  2. Random Walk
    The notion that stock price changes are random and unpredictable.   P(t0) = P(t-1)+ E(t)     E=random news
  3. Weak Form
    Assertion that stock prices already reflect all information contained in the history of past trading
  4. Semistrong-Form
    Assertion that stock prices already reflect all publicly available information
  5. Strong-Form
    Assertion that stock prices already reflect all relevant information, including inside information
  6. Technical Analysis
    Use of historical trends and patterns in prices to predict future price movements
  7. Fundamental Analysis
    Research on determinants of stock value, such as earnings and dividend prospects, expectations for future interest rates, and risk of the firm.  Uses current news to value/forecast asset
  8. Resistance Level
    price level above which it is supposedly unlikely for a stock or stock index to rise
  9. Support Level
    price level below which it is supposedly unlikely for a stock or stock index to fall
  10. Passive Investment Strategy
    Buying a well-diversified portfolio without attempting to search out mispriced securities
  11. Momentum Effect
    tendency of poorly performing stocks and well performing stocks in one period to continue that abnormal performance in following periods
  12. Reversal Effect
    tendency of poorly performing stocks and well performing stocks in one period to experience reversals in the following period
  13. Anomalies
    patterns of returns that seem to contradict the efficient market hypothesis
  14. Anomaly Examples (4)
    • 1)January Effect-highest return in Jan. (esp. small stocks)
    • 2)Book to Mkt Ratios- Value stocks outperform growth stocks on risk adjusted basis
    • 3)S-T Momentum- 6 months approx; aka drift)
    • 4)L-T Reversal- past winners become losers
  15. P/E Effect
    Portfolios of low P/E stocks have exhibited higher average risk adjusted returns than high P/E stocks
  16. Neglected Firm Effect
    Tendency of investments in stock of less well known firms to generate abnormal returns
  17. Book-To-Market Effect
    Tendency for investments in shares of firms with high ratios of book value to market value to generate abnormal returns
  18. Arbitrage
    the force driving efficient prices, mechanism for "correcting" prices
  19. Abnormal Return
    return that differs from required return given the risk level, riskless profit

What would you like to do?

Home > Flashcards > Print Preview