Question
1) You own shares in a pharmaceutical company, Pill Co. Reading the Yahoo! Finance Web site, you see that PillCo was sued this morning by
1) You own shares in a pharmaceutical company, Pill Co. Reading the Yahoo! Finance Web site, you see that PillCo was sued this morning by users of PillCo's new heart drug, Amphlistatin. PillCo's stock has already been trading for a few hours today.
a. When the bad news about the lawsuits came out, what probably happened to the price of PillCo shares within just a few minutes?
b. According to the efficient markets hypothesis, should you sell your shares in PillCo now, a few hours after the bad news came out?
c. In many statistical studies of the stock market, the best strategy turns out to be "buy and hold." This means just what it sounds like: You buy a bunch of shares in different companies and hold them through good times and bad. People often have a tough time with the "bad" part of "holding through good times and bad." What does your answer to part b tell you about this idea?
2) There are three stocks available: a solar energy firm, an oil firm, and an airline. You can invest in two. Which two?
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