A Random Walk Down Wall Street Exam Questions (94 Terms) With Verified Definitions Updated 2024

Why might fundamental analysis fail to work? {Ans: -info and analysis may be incorrect -security analyst's estimate of value may be faulty -market may not correct its 'mistake' and the stock price might not converge to to its value estimate -Even if the security analyst's estimates of growth are correct, this info may already be reflected accurately by the market, and any difference between a security's price and value may result simply from an incorrect estimate of value. -even with correct info and value estimates, the stock you buy might still go down}Indicators {Ans: -hemline -super bowl -odd lot -dogs of the dow -Junuary}Hot News Response {Ans: some academics believe that stock prices underreact to news events and, therefore, purchasing (selling) stocks where good (bad) news comes out will produce abnormal returns. Fama found that apparent underreaction to info is about as common as overreaction, and post-event continuation of abnormal returns is as frequent as post-event reversal.}Three Giant Steps Down Wall Street {Ans: -no brainer: index funds -EMs and CAPEs (cycle adjusted PE ratios) -ETFs and Taxes -Do it yourself: rules which might help: sustainable growth, firm foundation, nice story, limit trading}Housing bubble and crash