ACT370H1 Lecture Notes - Efficient-Market Hypothesis, Divisor, Option Style

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14 Jan 2014
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Performance (price might go up), investment/speculation -> r. Support your favourite company, public relations (liquidity) trading time very short. Reduce number of shares on the market (for accounting reasons) Other benefits of ownership (eg. discounts, getting financial reports, voting rights, attending shareholder meetings) *cover another trade -> r + bad luck. Irrational buyers pay outside the bid-ask spread and drive the market. Covering a trade: a promises to be able to deliver 100,000 shares to b (probably b/c of option). A hopes it will not have to deliver, but if a must deliver and doesn"t already own the stock, a buys to cover. Unlimited supply of stock (market shortage, liquidity, market volume) Option ownership not affecting underlying price (triple witching) Investment: when i look at something and i have sound reason it will go up in value. Speculation: hope it will go up in value (take more risk, less sound judgement, shorter term)

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