FIN 300 Chapter Notes - Chapter 12: Dividend Yield, Fisher Equation, Risk Premium
15 Apr 2014
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Lo1 how to calculate the return on investment. Lo2 the historical returns on various important types of investments. Lo3 the historical risks on various important types of investments. Answers to concepts review and critical thinking questions (lo4) they all wish they had! If trading costs exist, then these investors lose by the amount of the costs. (lo4) unlike gambling, the stock market is a positive sum game; everybody can win. Also, speculators provide liquidity to markets and thus help to promote efficiency. (lo4) the emh only says, within the bounds of increasingly strong assumptions about the information processing of investors, that assets are fairly priced. An implication of this is that, on average, the typical market participant cannot earn excessive profits from a particular trading strategy. However, that does not mean that a few particular investors cannot outperform the market over a particular investment horizon.
