Principles of Finance · free preview
Preferred Stock and Efficient Markets
Preferred stock blends debt and equity features with a fixed dividend and priority over common, and the efficient market hypothesis holds that prices reflect available information quickly, in weak, semi-strong, and strong forms, with profound implications for what analysis can achieve.
1. Preferred stock as a hybrid
Preferred stock as a hybrid
2. What efficient means
What efficient means
3. Implications for analysis
Implications for analysis
4. The closing lesson for valuation
The closing lesson for valuation
5. The hybrid's features
Which pairing correctly lists one debt-like and one equity-like feature of preferred stock?
6. The cumulative feature
What does the cumulative feature in preferred stock provide?
7. The two efficiencies
Which statement correctly distinguishes operational from informational efficiency?
8. The three forms
Which ordering of the efficient market hypothesis forms matches information reflected, from narrowest to broadest?
9. Weak form and charts
If a market is weak form efficient, what does that imply about technical analysis, the reading of past price charts?
10. The active manager's record
What does the long-run record of most active managers relative to their benchmarks suggest about market efficiency?
11. The claim's abbreviation
What three-letter abbreviation names the efficient market hypothesis? Write the abbreviation.
12. The middle form
What two-word hyphenated form of efficiency claims prices reflect all public information? Answer in lowercase.
13. The favored vehicle of efficiency
What two-word fund type, holding the whole market at low cost, does the EMH recommend for most investors? Answer in lowercase.
14. The arrears claim
What one-word term names the accumulated unpaid dividends that cumulative preferred stock must clear before common resumes? Answer in lowercase.
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