Question

1.Utopian economics characterizes speculation as stabilizing yet reality economics said that speculation could be de-stabilizing. Explain these two views.

2.Let’s assume that market is inefficient. They why don’t more people beat the market?

3.Show how efficient markets is the child of free-market thought.

4.Explain what is meant by rational irrationality and explain an example that is not directly related to finance.

5.Why does an efficient market imply a normal distribution in stock returns?

6. Let’s play the following game: Guess a number from 0 to 100 with the goal of making your guess as close as possible to two-thirds of the average guess of those participating in the contest. Now let’s assume, everyone in the game is completely rational. What number will everyone choose? Why?

7.What is the limits to arbitrage argument?

8.Explain how mark to market accounting can cause booms and busts.

9.Why is QWERTY an example of market failure?

Answer 1