If Stock Markets Are Inefficient

question 36

Multiple Choice

If stock markets are inefficient

• A)fundamental value analysis will not be effective.
• B)it will be easier for investors to find stocks that are undervalued.
• C)stock prices fully reflect information that is available to investors.
• D)stock selections by investors will not consistently beat the market.

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Definitions:

Non-strategic Investments

Investments not central to a company's business model or core mission, often made for diversification or income generation purposes rather than long-term strategic initiatives.

Investment in Associates

A financial interest held in another company that gives the investor significant influence, typically reflected by ownership of 20% to 50% of the voting stock.

Unrealized Gain

An increase in the value of an asset that has not been sold, hence the gain is not reflected in the financial statements as actual profit.

Equity Method

An accounting technique used by a company to record its investment in another company based on the profit or loss and changes in the investee's equity.