Studies of Liquidity Spreads in Security Markets Have Shown That

question 50

Multiple Choice

Studies of liquidity spreads in security markets have shown that

• A) liquid stocks earn higher returns than illiquid stocks.
• B) illiquid stocks earn higher returns than liquid stocks.
• C) both liquid and illiquid stocks earn the same returns.
• D) illiquid stocks are good investments for frequent,short-term traders.
• E) None of these are true.

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Definitions:

Poison Pill Amendment

A strategic defense tactic used by companies to prevent or discourage unwanted takeover bids by making the company less attractive to the potential acquirer.

Shareholders

Individuals or entities that own shares in a corporation, giving them ownership interests and possibly voting rights.

Synergy

The increased effectiveness that results when two or more entities work together compared to working separately.

Lockup Agreement

The part of the underwriting contract that specifies how long insiders must wait after an IPO before they can sell stock.