Impact of Dividend Cessation on Investor Risk and Return

The efficient market hypothesis states that prices established by efficient markets should be fair, meaning individual traders should not be able to consistently earn excess returns through investment selections and timing decisions.

Examples of market anomalies that suggest markets are not always efficient include the firm size effect (investing in smaller stocks will earn consistently higher returns) and the January effect (if you buy stock in January you generally get higher return).

As stated in the text, anomalies are not enduring, and so their identification will not consistently deliver excess returns.

<p>According to the text, Funds would need to buy newsfeeds, hire financial economists but all for a cost.</p> Signup and view all the answers

<p>The text states that on average, higher return only compensates you for the costs of being informed.</p> Signup and view all the answers

<p>The January effect is the phenomenon where if you buy stock in January you generally get higher return.</p> Signup and view all the answers

<p>The firm size effect is the phenomenon where investing in smaller stocks will earn consistently higher returns.</p> Signup and view all the answers

<p>The text states that Anomalies offer opportunities to earn excess returns but are eliminated by the trading that seeks to exploit them.</p> Signup and view all the answers

<p>The efficient market hypothesis states that prices established by efficient markets should be fair, meaning individual traders should not be able to consistently earn excess returns through investment selections and timing decisions.</p> Signup and view all the answers

<p>The text states that on average, higher return only compensates you for the costs of being informed.</p> Signup and view all the answers