Macroeconomics Ch. 27

Changes in stock prices are impossible to predict from available info, according to the efficient market hypothesis

Active portfolio managers usually fail to beat the index funds. (buying all the stocks)

theory that asset prices reflect all publicly available info about the value of an asset

According to the efficient market hypothesis, the best thing you can do is to diversify your portfolio.

Whenever the price of an asset rises above what appears to be its fundamental value, the market is said to be

Following trends such as watching stocks rise and then buying them have proven to NOT outperform the market.

Who said this? "Compounding is the greatest mathematical discovery of all time."

a mutual fund that buys all the stock in a given stock index

The rule of 70 only applies to a savings account

According to the efficient market hypothesis, the _________________________sets the market price.

Diversification cannot elminate

Risk in a stock portfolio falls substantially as the number of stocks increases.

Choosing twenty stocks by putting the names of all stocks on a dart board and throwing darts won't lead you astray

One of the main components of the efficient market hypothesis is that asset prices reflect all available info, called

It is possible to eliminate ALL risk by increasing the number of stocks in the stock portfolio

Which, over history has produced much higher rates of return?

If some variable grows at a rate of x % per year, then that variable double in 70/x years.

The study of a company's accounting statements and future prospects to determine its value

When evaluating a stock, one shouldn't look just at the price today, but the value of a stock to people

the amount of money today that would be needed, using prevailing interest rates, to produce a given future amount of $

the amount of money in the future that an amount of $ today will yield, given prevailing interest rates:

The rule of 70 only applies to a growing economy.

Diversification can eliminate

The efficient market hypotheses says that it is possible/impossible to beat the market.

The text discusses one of the major principles-the relationship between risk and

Present value vs. future value depends largely on

Market irrationality exists today in the stock market. (we really don't know what is going to happen)