You Are the Manager of a Firm That Has Just

question 20

Essay

You are the manager of a firm that has just created a new and improved version of a product you know to be superior to every other product on the market.To signal your quality,you have instructed your marketing department to change the label of your firm's product to include the phrase,"New and Improved." Based on this information,do you think it is prudent to contact your production department and instruct them to significantly expand capacity?

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Definitions:

Strong-form Efficient

A theory suggesting that all information, public and private, is fully reflected in stock prices, and that it is impossible to consistently achieve higher returns.

Semistrong-form Efficient

Refers to a market efficiency form where prices include all publicly available information, including both historical and newly released financial data.

Weak-form Efficient

A level of market efficiency that assumes all past trading information is already reflected in stock prices, thus negating the ability to gain higher returns through analysis of historical prices.

Survivorship Bias

Survivorship bias is the logical error of concentrating on the entities or people that made it past some selection process and overlooking those that did not, often leading to false conclusions.