The Observed Empirical Fact That Stocks Attract Particular Investors Based

question 9

Multiple Choice

The observed empirical fact that stocks attract particular investors based on the firm's dividend policy and the resulting tax impact on investors is called the

• A)clientele effect.
• B)efficient markets hypothesis.
• C)information content effect.
• D)MM Proposition I.
• E)MM Proposition II.

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Definitions:

Market Price

The current price at which a good or service can be bought or sold on the open market, determined by the forces of supply and demand.

Total Market

The entire demand for a certain product or service, inclusive of all segments and types of consumers within a market.

Price Searchers

Firms or individuals who actively seek out and compare prices in an effort to find the most favorable market conditions.

Price Takers

Economic agents who accept the prevailing market prices and have no influence over them due to their small market share.