Question
1. Why does looking at a securitys historical return off little help in determining whether a stock will have alpha in the future? Do the
1. Why does looking at a securitys historical return off little help in determining whether a stock will have alpha in the future? Do the historical returns offer us any useful information at all, or are they completely useless?
2) PBYIs current BID-ASK is $59.00 - $60.00. PBYI is going to release their annual report tomorrow; you have special skill in valuing biotech companies, and you believe that PBYI has an expected alpha tomorrow of 2% compared to the markets current best estimate of fair value. Should you buy PBYI? What if the expected alpha was 0.5% instead of 2%... Would this change your answer?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started