Principles of Corporate Finance
Random Walk Theory w The movement of stock prices from day to day DO NOT reflect any pattern. w Statistically speaking, the move ...
Random Walk Theory $103.00 $100.00 $106.09 $100.43 $97.50 $100.43 $95.06 Coin Toss Game Heads Heads Heads Tails Tails Tails ...
Random Walk Theory S&P 500 Five Year Trend? or 5 yrs of the Coin Toss Game? 80 130 180 Month Level ...
Random Walk Theory S&P 500 Five Year Trend? or 5 yrs of the Coin Toss Game? 80 130 180 230 Month Level ...
Random Walk Theory ...
Random Walk Theory ...
Random Walk Theory ...
Random Walk Theory ...
Random Walk Theory ...
Efficient Market Theory w Weak Form Efficiency ËMarket prices reflect all historical information. w Semi-Strong Form Efficiency ...
Efficient Market Theory w Fundamental Analysts ËResearch the value of stocks using NPV and other measurements of cash flow. ...
Efficient Market Theory w Technical Analysts ËForecast stock prices based on the watching the fluctuations in historical prices ...
Efficient Market Theory Last Month This Month Next Month $90 70 50 Microsoft Stock Price disappearCycles once identified ...
Efficient Market Theory -16 -11 -6 -1 4 9 14 19 24 29 34 39 Days Relative to annoncement date Cumulative Abnormal Return (%) Ann ...
Efficient Market Theory -40 -30 -20 -10 0 10 20 30 40 1962 1977 1992 Return (%) Funds Market Average Annual Return on 1493 Mutua ...
Efficient Market Theory 0 5 10 15 20 First Second Third Fourth Fifth Average Return (%) IPO Matched Stocks IPO Non-Excess Return ...
Efficient Market Theory 1987 Stock Market Crash 1193 . 114. 10 ( )^16.^7 pre crash = r − g = − = PV index Div ...
Efficient Market Theory 1987 Stock Market Crash 1193 . 114. 10 ( )^16.^7 pre crash = r − g = − = PV index Div 928 . 114. 096 ( ) ...
Lessons of Market Efficiency ‹Markets have no memory ‹Trust market prices ‹Read the entrails ‹There are no financial illusions ‹ ...
Example: How stock splits affect value 0 5 10 15 20 25 30 35 40 Month relative to split Cumulative abnormal return % -29 0 30 So ...
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