If You Were to Purchase the Shares of a Firm

question 96

Multiple Choice

If you were to purchase the shares of a firm one month after its IPO as well as the shares of a comparable sized (matched) firm on the same day and then hold both shares for five years,you would expect

• A) that the return of the IPO firm's stock to be greater than that of the matched firm.
• B) that the return of the matched firm's stock to be greater than that of the IPO firm.
• C) that the return of the two stocks to be equal.
• D) that since the two firms are likely to be uncorrelated the relation cannot be predicted.

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Definitions:

Domesticated

In legal terms, this involves the process by which a foreign judgment or legal decision is recognized and can be enforced within the jurisdiction of another country or state.

Lapses

Occurrences where something becomes invalid because a condition has not been met or time has expired, often used in insurance for policy expirations.

Default

The failure to fulfill a legal obligation, especially the failure to pay back a loan on time or to appear in court when required.

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