Insiders Are Able to Profitably Trade and Earn Abnormal Returns

question 10

Multiple Choice

Insiders are able to profitably trade and earn abnormal returns prior to the announcement of positive news.This is a violation of which form of efficiency?

• A) Weak form efficiency
• B) Semi-strong form efficiency
• C) Strong form efficiency
• D) Technical analysis

Appreciate the impact of tax rates on investment decisions and profitability.

Understand the concept of hurdle rates and its application in investment decision-making.

Analyze the effects of non-uniform cash flows on the net present value calculations.

Understand the limitations of the payback period method in capital budgeting, especially its disregard for the time value of money and cash flows beyond the payback period.

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Definitions:

Dopamine

A neurotransmitter in the brain that plays a key role in regulating mood, sleep, learning, and movement, often associated with the pleasure and reward system.

Norepinephrine

A neurotransmitter involved in the body's response to stress and regulation of mood, attention, and arousal.

Evolutionary View

A perspective in psychology (and other sciences) that seeks to explain traits, behaviors, and mental processes as adaptations that have evolved to solve recurrent problems faced by ancestral humans.

Phobias

Intense, irrational fears of specific objects, situations, or activities that result in severe anxiety and avoidance behaviors.