Explain why each of the independent statements below is false. A good explanatio

Question

Explain why each of the independent statements below is false. A good explanation should be between two and four sentences for each part. A mutual fund manager is concerned that the value of a portfolio of Treasury Bonds (average maturity = 15 years) will decrease as interest rates increase over the next three months. To construct the best hedge over this three month period he should sell T-Bill futures contracts. If the stock market is semi-strong form efficient, historical earnings information -and other public accounting information cannot help an analyst explain where a stock is currently trading within its 52 week range. (i.e., why the stock price is at the high end, the low end, or the middle of this range).

Explanation / Answer

1.

Treasury bills have maturities of a year or less.

And the t bonds have maturity of 15 years, so it will be a musmatch in terms of period, we need to sell t bond futures of similar maturity range.

2.

Its a kind of efficient Market Hypothesis that implies all public information is calculated into a stock's current share price. Meaning that neither fundamental nor technical analysis can be used to achieve superior gains.

So the analyst will be able to tell why the stock has gone up or down based on historical earning anslysis and other public information.As stock price 100% reflects all the information.

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