3) True/False Explain. For each of the following statements, state whether it is true or...
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3) True/False Explain. For each of the following statements, state whether it is true or false and provide a brief explanation of your reasoning.
3) a) True/False Explain. For each of the following statements, state whether it is true or false and provide a brief explanation of your reasoning. Knowing yesterday's stock price is helpful for predicting tomorrow's stock price based on the semi-strong form of the efficient market hypothesis. Fundamental analysis is useful for predicting future stock prices based on the semi-strong from of the efficient market hypothesis. If a market is efficient, it may not be perfectly competitive. b) c) 4) The following is the Fama-French Three Factor model estimated for ECN Inc. [Notice here for alpha, 1 would be 1%.] ECN Inc. Three Factor Model Alpha/Factor Rm-Rf SMB HML Coefficient 1 1.30 1.10 -0.67 P-Value 0.12 0.00 0.04 0.09 a a) Using only the variables statistically significant at a 5% level, what is the expected return on ECN Inc. if the risk-free rate is 1%, market premium is 12%, small stocks outperform large by 3% and value stocks outperform growth stocks by 5%. If ECN Inc's current return is 20%, is ECN Inc. over- or under-valued based on the three factor model. b)
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