Discussion Questions
1. Despite many years of research, the evidence on market efficiency described in this chapter appears to be inconclusive. Some argue that this is because researchers have been unable to link company fundamentals to stock prices precisely. Comment.
2. Geoffrey Henley, a professor of finance, states: “The capital market is efficient. I don’t know why anyone would bother devoting their time to following individual stocks and doing fundamental analysis. The best approach is to buy and hold a well-diversified portfolio of stocks.” Do you agree? Why or why not?
3. What is the difference between fundamental and technical analysis? Can you think of any trading strategies that use technical analysis? What are the underlying assumptions made by these strategies?
4. Investment funds follow many different types of investment strategies. Income funds focus on stocks with high dividend yields, growth funds invest in stocks that are expected to have high capital appreciation, value funds follow stocks that are considered to be undervalued, and short funds bet against stocks they consider to be overvalued. What types of investors are likely to be attracted to each of these types of funds? Why?
5. Intergalactic Software Company went public three months ago. You are a sophisticated investor who devotes time to fundamental analysis as a way of identifying mispriced stocks. Which of the following characteristics would you focus on in deciding whether to follow this stock?
• Market capitalization
• The average number of shares traded per day
• The bid-ask spread for the stock
• Whether the underwriter that brought the firm public is a top tier investment banking firm
• Whether the firm’s audit company is a Big Four firm
• Whether there are analysts from major brokerage firms following the company
• Whether the stock is held mostly by retail or by institutional investors
6. Intergalactic Software Company’s stock has a market price of $20 per share and a book value of $12 per share. If its cost of equity capital is 15% and its book value is expected to grow at 5% per year indefinitely, what is the market’s assessment of its steady state return on equity?

If the stock price increases to $35 and the market does not expect the firm’s growth rate to change, what is the revised steady state ROE?
If instead the price increase was due to an increase in the market’s assessments about long-term book value growth rather than long-term ROE, what would the price revision imply for the steady state growth rate?
7. There are two major types of financial analysts: buy-side and sell-side. Buy-side analysts work for investment firms and make stock recommendations that are available only to the management of funds within that firm. Sell-side analysts work for brokerage firms and make recommendations that are used to sell stock to the brokerage firms’ clients, which include individual investors and managers of investment funds. What would be the differences in tasks and motivations of these two types of analysts?
8. Many market participants believe that sell-side analysts are too optimistic in their recommendations to buy stocks, and too slow to recommend sells. What factors might explain this bias?
9. Joe Klein is an analyst for an investment banking firm that offers both underwriting and brokerage services. Joe sends you a highly favorable report on a stock that his firm recently helped go public and for which it currently makes the market. What are the potential advantages and disadvantages in relying on Joe’s report in deciding whether to buy the stock?
10. Joe states, “I can see how ratio analysis and valuation help me do fundamental analysis, but I don’t see the value of doing strategy analysis.” Can you explain to him how strategy analysis could be potentially useful?

I need you to help me write a resume. About one page and half. No word account. Thank you.

develop two-three full paragraphs in response two of the ‘prompts’ listed below. As the reading are very long I recommend you utilize the Power Points for details and assistance regarding your responses: that’s what they are there for! The format is informal, you can use first person and your response is a ‘reading analysis’ not an essay. You do not need to ‘retell’ the story, unless placing the text in context adds to the response in your opinion. You need to discuss the topics in your own words.

Choose ONE question from each reading

Ramayana

1. After reading Ramayana discuss the story of Sita from her perspective. Why did she choose to stay in Lanka after Hanamun offered to take her back, please consider all of the elements in your response keeping in mind that we as readers know the terrible treatment she has received at Ravana’s hand and her devotion to Rama? Consider why she considers Rama’s future glory more important than her rescue.
2. After reading Ramayana discuss and describe the elements of the story that make it entertaining and engaging from your perspective. Is it the fairytale like stories in the text: flying monkeys that turn into mountains, talking animals, walking through fire and so much more? Is it the love story, friendship, folly of youth or all of the above?
3. After reading Ramayana ( special focus on readings pp. 1180-1183) Why does Rama put Sita through a ‘test of fidelity’? What is her response to his doubt? AND, lastly after (reading p. 1136 and lecture) how does she become the figure of devotion and honor for Indian women for her strength amid suffering. Note: our text does not have the final books of the Ramayana but p.1136 tells the end of the story for us.

Mahabharata

• After reading the Mahabharata discuss the character of Bhishma who is seen as a spiritual and military leader who must model behavior of both positions. from the perspective of his ongoing struggle to fulfill his Dharma and especially how he faces death on the ‘bed of arrows’. Does he want the combatants to see peace?
• After reading The Bhagavad-Gita, discuss the nature of Arjuna’s fear. Can it be interpreted from the level of imprisonment in Do you think he tries to reflect his Dharma in battle? What do YOU see as his fatal flaws as a character?
• After reading the Mahabharata, discuss the tragic character of Karna. How has his upbringing influenced his behavior? How does he see his Dharma as the warrior code of loyalty by which he lives? And lastly, Why does his fallen body emit a light so powerful as to illuminate the sky?

Consider the following two-player three-stage game with incomplete information. In each period, player 1 has three possible actions: S(hunt the stag), R (hunt the rabbit), and H (stay home), and player 2 has two possible actions: S(hunt the stag) and R(hunt the rabbit). Player 1 has one of three equally likely types: s, r, and h. In any given period, if player 1 has type she gets 1 if both player play S and, and 0 otherwise. Similarly, type r gets h if both players play R and 0 otherwise, and type h gets 1 if he plays H and 0 otherwise. Player 2 has no private information. In a given period, he gets 1 if both play S or both play R and 0 otherwise. Is there a sequential equilibrium in which the following observation has positive probability: player 1 plays H in period 0, both players play S in period h, and player 2 R in period2?