COMMERCE 4AF3 Lecture Notes - Lecture 3: Regulation Fair Disclosure, Financial Analyst, Systematic Risk
24 Jan 2019
School
Department
Course
Professor
Document Summary
Used to think markets were working efficiently and no insider trading but there actually was so they introduced. Martha stewart had friend who was financial analyst. She left martha a voicemail about which stocks to buy. Random walk down wall street last year"s earnings have no impact on this year"s earnings. Says you don"t have to give professional money managers money to do your investments. Share price incorporates all publicly available information into stock price and there are no bargain stocks (i. e. buy cheap and resell at higher price). Wall street tested this theory and showed that professional money managers earned above average returns. Risk differences; pros choose high-risk firms that give higher returns. Pros would likely choose big companies and the darts would more likely chose smaller firms. It"s also possible analysts could"ve received inside information about their favourite companies. Regulation fd; prohibits managers from disclosing information to analysts that isn"t available to public first.
