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Indicate, by clicking in the relevant boxes, whether the following statements are true or
false.(1)The existence of projects with positive expected net present values contradicts the idea that the stock market is strong?form efficient
(2)The existence of information content in dividends contradicts the idea that the stock market is strong?form efficientThe first statement is false and second is true
Dear sir
Could you pls explain the reason why 1st is false and 2nd is true?
Thank you1 is false because a strong form efficient market will already have taken into account the fact that there are projects with positive NPV’s.
2. The second is true because if the market is strong form efficient then shareholders will already know all relevant information and the dividends themselves do not give them any additional information.
Sorry i still didnt understand ur explanation for the 1st statement
For the 2nd statement do u mean that existence of info content in dividends will not give shareholders any additional info and therefore they would not beat a market which is strong form efficient (therefore statement is true?)If the market is strong form efficient, then shareholders will know all information about the company and its plane and the share price will have already taken the information into account. Shareholders will know about the existence of these projects and whether or not the company intends to invest in them.
For the second statement, yes – the dividends will give no extra information.
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