The Possibility of Speculative Bubbles in the Stock Market Arises

question 37

Multiple Choice

The possibility of speculative bubbles in the stock market arises in part because

• A)stock prices may not depend at all on psychological factors.
• B)fundamental analysis may be the correct way to evaluate the value of stocks.
• C)future streams of dividend payments are very hard to estimate.
• D)the value of shares of stock depends not only on the future stream of dividend payments but also on the price at which the stock will be sold.

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Definitions:

Larger Firms

Companies or enterprises that are significant in size, often having a large number of employees, operations, and market influence compared to smaller businesses.

Smaller Firms

Companies with a relatively small number of employees, market share, or revenue, often characterized by more flexible operations.

Horizontal Merger

A business consolidation that occurs between firms operating in the same industry or sector.

Conglomerate Company

A large corporation comprised of diverse subsidiaries or businesses across various industries, often with different operational focus.