Independent Deviations from Rationality

question 61

Multiple Choice

Independent deviations from rationality:

• A)only exist when the overall market is overvalued.
• B)prevent the markets from ever being efficient.
• C)can create an efficient market.
• D)are the actions taken by rational arbitrage traders.
• E)do not exist in an efficient market.

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Definitions:

Volatility

A statistical measure of the dispersion of returns for a given security or market index, indicating how much and how quickly the value of an investment, market, or market sector changes.

Geometric Average Return

The average rate of return of a set of values calculated by multiplying the n values and taking the n-th root.

Multi-year Period

A timeframe that extends beyond a single year, often used in financial planning, projections, and analysis.

Compound Return

The rate of return on an investment that includes reinvesting the gains to generate additional earnings over time.