Question

If average returns are not increasing in securities systematic risk, can we conclude from this that...

If average returns are not increasing in securities systematic risk, can we
conclude from this that capital markets are inefficient? Explain.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Ans )

First, we have to understand shat is systematic risk: It is a type of risk that is non - diversifiable risk. It comes from the volatilities of external factors. Which are noncontrollable. This may be due to political factors, economic downturn or natural disasters, etc. This are unavoidable.

On the other hand inefficient market means security prices are completely random and non-controllable. It majorly happens due to assymetry of information available about securities. Like details of upcoming production or recent improvement of product line of a company only available to few people.

So if markets return are not increasing due to systematic risk means these may be some unavoidable scenario. Like recent COVID19 situation a systematic risk. From this we can not conclude capital markets are inefficient

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
If average returns are not increasing in securities systematic risk, can we conclude from this that...
If average returns are not increasing in securities systematic risk, can we conclude from this that capital markets are inefficient? Explain
Wiki Max. Marks- 2 Contribute Wiki on the topic: Systematic risk and expected returns in emerging...
Wiki Max. Marks- 2 Contribute Wiki on the topic: Systematic risk and expected returns in emerging markets. Systematic risk, also known as "market risk" or "un-diversifiable risk", is the doubt inherent to the entire market. Also brought up to as volatility systematic risk consists of the day-to-day fluctuations in a stock's price. Volatility is a criterion of risk because it refers to the behavior, or "temperament," of your investment rather than the reason for this behavior. Because market movement is...
"Risk' can be best defined as on the of the followings:   a. Variability of returns and...
"Risk' can be best defined as on the of the followings:   a. Variability of returns and probability of financial loss b. Chance of financial loss   c. Variability of returns   d. Correlation of relationship among two variables Which of the following statement is NOT TRUE when we argue that the idea of riskless arbitrage is to accumulate the portfolio with following conditions : a. Requires no net wealth invested initially   b. Invest in the long-term securities only where risk will be...
With the production function production. Y=AtKt^1/3Lt^2/3, if we double ________, we have an increasing returns capital...
With the production function production. Y=AtKt^1/3Lt^2/3, if we double ________, we have an increasing returns capital capital and the stock of ideas capital and labor capital, labor, and the stock of ideas labor and the stock of ideas
how can we show selecting a 1-in-k systematic sample from a population of size N is...
how can we show selecting a 1-in-k systematic sample from a population of size N is the same as selecting a unique cluster in the population of clusters. DON'T PROOF EXPLAIN IN WORDS USING GENERAL NOTATIONS(N,k,n）
Risk. Suppose you are evaluating the risk of 10 year US Treasury bonds. The returns from...
Risk. Suppose you are evaluating the risk of 10 year US Treasury bonds. The returns from the previous five years are listed below. Year 2011 2012 2013 2014 2015 10−Yr T−Bond’s Return 16.04% 2.97% −9.10% 10.75% 1.28% Calculate the average annual return. (5 points) Calculate the variance of returns. (5 points) Calculate the volatility of returns. (10 points) Calculate the range of values we can be 95% sure returns will fall within. (5 points)
Explain how increasing returns to scale in production can be a basis for trade.
Explain how increasing returns to scale in production can be a basis for trade.
Problem 7 You estimated a regression model using annual returns of ExxonMobil (as a dependent variable)...
Problem 7 You estimated a regression model using annual returns of ExxonMobil (as a dependent variable) and of the market (as an independent variable). The R-squared of this regression is 0.9. We can conclude that: A) ExxonMobil’s systematic risk is higher than ExxonMobil’s unsystematic risk B) ExxonMobil’s unsystematic risk is higher than ExxonMobil’s systematic risk C) ExxonMobil’s systematic risk and ExxonMobil’s unsystematic risk are about the same D) This R-squared implies that ExxonMobil’s beta is larger than one E) This...
A stock has its past returns graphed against market returns. The line that has the best...
A stock has its past returns graphed against market returns. The line that has the best fit for the return data has the formula y = 0.335x + 0.501. What information can we derive from this? The beta of the stock is 0.501. The stock must have earned lower returns than the market during that period. The alpha of this stock is 0.335. The systematic risk of this stock is greater than that of the average stock. The beta of...
Can you explain why diversification can reduce risk on a portfolio of securities? Provide an example.
Can you explain why diversification can reduce risk on a portfolio of securities? Provide an example.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT