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Question #1: The author gives several reasons why the blame cast on the EMH for the global financial crisis is unfounded. Which one makes the most sense to you? Why? Which argument do you disagree...

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Question #1: The author gives several reasons why the blame cast on the EMH for the global financial crisis is unfounded. Which one makes the most sense to you? Why? Which argument do you disagree with, or are not convinced by? Why?

Question #2: The author proposes several lessons about market efficiency that we can learn from the financial crisis. One is that there are limitations to the EMH as a theory of financial markets. He specifically argues that the EMH is silent on the “supply side” of the information market. What does he mean by this? Do you agree with his view? Why or why not?

Question #3: What are the implications for corporate financial managers of the EMH as articulated and defended by the author? Frame you answer around implications for issues such as capital raising, dividend payouts, capital expenditures, managerial incentives, and firm performance.

ball-2009-journalofappliedcorporatefinance-discussion-3-g2mpi01f.pdf
Answered 3 days After Jun 13, 2021

Solution

Sumit answered on Jun 17 2021
148 Votes
Q1
The argument which makes most sense to me is that the EMH assumes on information and pricing does not balance out with the mispricing that drives economic bu
les. The major reason behind economic bu
les to occur is when asset prices on the true economic value and then fall constantly. The main reason is that the crisis was the result of high risk, complex financial products, conflicts of interest, and the failure of regulators, the credit rating agencies is in the excesses of stock exchange markets. According to the theory of EMH, the share prices of the listed securities reflect the true value of the share price because the information is shared among all the market participants. As stated in the EMH theory the share prices are not impacted by factors such as behavioral biases of the investors.
According to me this agreement is valid as due to the failure of the regulators these bu
les are formed and risk in the financial market is increased.
Q2
One of the most important...
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