According to Theory,studying Historical Stock Price Movements to Identify Mispriced

question 13

Multiple Choice

According to theory,studying historical stock price movements to identify mispriced stocks:

• A)is effective as long as the market is only semistrong form efficient.
• B)is effective provided the market is only weak form efficient.
• C)is ineffective even when the market is only weak form efficient.
• D)becomes ineffective as soon as the market gains semistrong form efficiency.
• E)is ineffective only in strong form efficient markets.

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Definitions:

Incremental Analysis

Incremental Analysis is a decision-making tool used to compare the additional costs and benefits of one option over another, ignoring costs and benefits that are unchanged between options.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent and salaries.

Variable Departmental Costs

Costs that vary directly with the level of output or activity within a specific department of a company.

Incremental Profit

The additional profit derived from making changes to the business operations, such as increasing production or sales.