Question

If the shares of a company are trading at a historically high price and the market is weak-form efficient, then

Group of answer choices

A) Management should not try to time a stock issue or a repurchase based upon a historically high stock price.

B) Management should take advantage by issuing more shares at this time.

C) Management should take advantage by issuing more shares at this time.

D) Management should take advantage by both issuing more shares at this time and repurchasing some shares at this time.

If the problem of adverse selection exists then the market

Group of answer choices

A) Cannot be strong-form efficient.

B) Can still be weak-form efficient but cannot be semi-strong-form efficient.

C) Cannot be semi-strong-form efficient.

D) Cannot be weak-form efficient.

Market efficiency is

Group of answer choices

A) Not effected by either fixed costs of arbitrage or by variable costs of arbitrage.

B) Damaged equally by high variable costs of arbitrage and high fixed costs of arbitrage.

C) Damaged more by high fixed costs of arbitrage than by high variable costs of arbitrage.

D) Damaged more by high variable costs of arbitrage than by high fixed costs of arbitrage.

Answer 1

1.weak form of market efficiency says that market is not completely reflecting the past information and there is a scope for making money through technical analysis so if there is a trending stock on the way upside,it will go up because of technical Analysis

So if the shares of a company is trading at all time high, they will move more higher because of trends in technical analysis and in such case a company should issue more shares and they can also buy shares in the market through repurchasing.

rest of the options are false because they are not according to the weak market efficient theory.

Hence, the correct answer would be option (D)