Podcast
Questions and Answers
What factors transform fundamental information into share prices?
What factors transform fundamental information into share prices?
- Expected future returns and liquidity risk
- Expected future returns, uncertainty, and liquidity risk (correct)
- Uncertainty and liquidity risk
- Expected future returns and uncertainty
If the risk-free rate of interest is 4% and a stock is priced to yield a 6% premium, what is the expected return on the stock?
If the risk-free rate of interest is 4% and a stock is priced to yield a 6% premium, what is the expected return on the stock?
- 2%
- 6%
- 10%
- 4% (correct)
Which of the following is true about a dealer in the financial market?
Which of the following is true about a dealer in the financial market?
- A dealer posts bid quotes to buy securities. (correct)
- A dealer charges a commission for their services.
- A dealer primarily serves retail customers.
- A dealer is always on the buy side of the market.
What is the purpose of marking to market?
What is the purpose of marking to market?
What is a dark pool in the context of financial trading?
What is a dark pool in the context of financial trading?
Which type of order is considered a 'liquidity-taker' in the market?
Which type of order is considered a 'liquidity-taker' in the market?
What is the risk associated with limit orders?
What is the risk associated with limit orders?
What is the advantage of using a limit order over a market order?
What is the advantage of using a limit order over a market order?
What is a common special condition that can be attached to an order?
What is a common special condition that can be attached to an order?
What are some characteristics of a non-frictionless equity market?
What are some characteristics of a non-frictionless equity market?
What is the effect of expectations being divergent?
What is the effect of expectations being divergent?
Who should understand the concepts discussed in the chapter, aside from business school students and other interested people?
Who should understand the concepts discussed in the chapter, aside from business school students and other interested people?
What is the definition of liquidity?
What is the definition of liquidity?
What is the term used to describe the difference between the price at which one can buy shares and the price at which one can sell shares?
What is the term used to describe the difference between the price at which one can buy shares and the price at which one can sell shares?
What is the compensation investors receive for accepting risk?
What is the compensation investors receive for accepting risk?
What is the compensation investors receive for buying shares that may be difficult to sell in the future?
What is the compensation investors receive for buying shares that may be difficult to sell in the future?
What are information shocks?
What are information shocks?
What is the meaning of 'liquidity' in the context of liquidity shocks?
What is the meaning of 'liquidity' in the context of liquidity shocks?
What happens to a stock's price following a liquidity shock?
What happens to a stock's price following a liquidity shock?
What is price discovery in the context of a marketplace?
What is price discovery in the context of a marketplace?
Which of the following is an example of an explicit cost in trading?
Which of the following is an example of an explicit cost in trading?
What is the minimum size of the bid-ask spread for stocks in the United States with discrete prices?
What is the minimum size of the bid-ask spread for stocks in the United States with discrete prices?
When does a limit order buyer incur an opportunity cost?
When does a limit order buyer incur an opportunity cost?
What is short selling?
What is short selling?
Which of the following factors transform fundamental information into share prices?
Which of the following factors transform fundamental information into share prices?
What accounts for the premium in the stock's price?
What accounts for the premium in the stock's price?
Which of the following is an example of an implicit cost in trading?
Which of the following is an example of an implicit cost in trading?
What is the cost of a round trip for market order traders?
What is the cost of a round trip for market order traders?
What is the difference between the price of an actual trade and the price of a hypothetical trade based on a benchmark value called?
What is the difference between the price of an actual trade and the price of a hypothetical trade based on a benchmark value called?
What drives trading in the market?
What drives trading in the market?
Which of the following is NOT a characteristic of a limit order?
Which of the following is NOT a characteristic of a limit order?
Which of the following is a special order type?
Which of the following is a special order type?
What is the definition of algorithmic trading?
What is the definition of algorithmic trading?
What are the two categories of trading costs?
What are the two categories of trading costs?
What is the main factor that investors are compensated for when buying shares that may be difficult to sell in the future?
What is the main factor that investors are compensated for when buying shares that may be difficult to sell in the future?
What is the definition of liquidity?
What is the definition of liquidity?
What is the cost associated with buying or selling shares with immediacy?
What is the cost associated with buying or selling shares with immediacy?
What is the main challenge for institutional-sized orders in terms of trading shares?
What is the main challenge for institutional-sized orders in terms of trading shares?
Which of the following best describes the role of a dealer in the financial market?
Which of the following best describes the role of a dealer in the financial market?
What is the difference between sell-side traders and buy-side traders?
What is the difference between sell-side traders and buy-side traders?
What is the purpose of marking to market?
What is the purpose of marking to market?
Which of the following best describes the concept of price discovery in a marketplace?
Which of the following best describes the concept of price discovery in a marketplace?
What is the main difference between information shocks and liquidity shocks?
What is the main difference between information shocks and liquidity shocks?
What is the role of brokers in the financial market?
What is the role of brokers in the financial market?
What is the purpose of dark pools in financial trading?
What is the purpose of dark pools in financial trading?
What are the two basic types of orders in the financial market?
What are the two basic types of orders in the financial market?
What is the purpose of a limit order?
What is the purpose of a limit order?
What is the difference between homogeneous expectations and divergent expectations?
What is the difference between homogeneous expectations and divergent expectations?
