38.Market Efficiency

Question 1

Market Value

Answer 1

is the price at which an asset currently trades. It represents the intersection of supply and demand.

Question 2

Intrinsic value

Answer 2

(or fundamental value) is the theoretical value of an asset that would be calculated by investors if they possessed (and accurately processed) all relevant information. Intrinsic value cannot be known with certainty, it can only be estimated.

Question 3

A market anomaly

Answer 3

s a change in a security’s price that cannot be attributed to new information. Anomalies may be observed for brief periods in an efficient market. However, for a market to be considered inefficient, anomalies must persist over long periods.

Question 4

The field of behavioral finance

Answer 4

seeks to understand how people make investment decisions (individually and collectively) by observing their actions. There is a major focus on cognitive biases that affect decision making. According to the behavioral finance perspective, cognitive biases may explain the existence of market pricing anomalies.