Which of the Following Is Correct Concerning Stock Market Irrationality

question 13

Multiple Choice

Which of the following is correct concerning stock market irrationality?

• A)Bubbles could arise,in part,because the price that people pay for stock depends on what they think someone else will pay for it in the future.
• B)Economists almost all agree that the evidence for stock market irrationality is convincing and the departures from rational pricing are important.
• C)Some evidence for the existence of market irrationality is that informed and presumably rational managers of mutual funds generally beat the market.
• D)All of the above are correct.

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Definitions:

Management Decision-Making

The process by which management identifies, evaluates, and chooses among alternative courses of action to achieve organizational objectives.

Traditional Income Statement

An income statement format that separates costs into categories of cost of goods sold and operating expenses to calculate net income.

Mixed Costs

Costs that have both a fixed and variable component, changing with the level of output but not directly proportional to it.

CVP Analysis

Cost-Volume-Profit Analysis is a technique in managerial accounting that examines the impact of cost and volume changes on a company’s operating and net income.