Which of the Following Is a Possible Exception to the Efficient-Market

question 48

Multiple Choice

Which of the following is a possible exception to the efficient-market theory?

• A)Underwriters charge investors more for IPO shares than they pay the issuing firms.
• B)IPO spreads are lower on larger issues.
• C)The issuance of equity is interpreted as an unfavorable signal by investors.
• D)The long-run returns of IPOs tend to underperform the market.

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Definitions:

Negotiator

A person skilled in discussion with the aim of reaching an agreement or compromise on behalf of a party in a dispute or negotiation.

Arbitration

A method of dispute resolution where a neutral third party, the arbitrator, makes a decision to resolve a conflict outside of court.

Judicial Review

The power of courts to assess the constitutionality of laws and actions of the executive and legislative branches.

Cost-Effective

Providing the best possible outcome or value for the amount of money spent.