Rewarding Desirable Behavior Is Generally Preferable to Punishing Misbehavior

question 370

True/False

Rewarding desirable behavior is generally preferable to punishing misbehavior.

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Definitions:

Risk Premium

The additional return expected by an investor for holding a risky asset, over and above the risk-free rate.

Semi-Strong Form

A form of the Efficient Market Hypothesis suggesting that stock prices reflect all publicly available information, making it impossible to consistently achieve higher returns.

Strong Form Efficient

A hypothesis stating that all information, both public and private, is completely reflected in stock prices, meaning no investor can achieve higher returns with specific information.

Weak Form Efficient

A market efficiency theory stating that all past trading information is already reflected in stock prices, and that technical analysis cannot consistently produce excess returns.