ECON40215-WE01 Security Analysis 2021
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ECON40215-WE01
Security Analysis
2021
Section A
Short Answer Questions
Answer any TWO questions from this section (each question carries 25 marks)
1. Explain the major features of short-selling and discuss the possible implicating of short-selling bans on stock prices and investors.
2. Compare and contrast the major characteristics of Unit trusts (open-end funds) and investment trusts (close-end funds) and comment on how such features might affect investors’ choice.
3. Explain how the changes in central banks’ discount rate affect stock returns.
4. Discuss the main functions of investment bank during the IPO process
Section B
Essay Questions
Answer ONE question from this section (each question carries 50 marks)
5. “ ... investors should be willing to pay for brokerage investment advice only if the expected benefit is at least as great as the cost of advice. A logical source of benefits for an investor would be excess stock returns following changes in broker recommendations.” (Womack, 1996). You are required to critically evaluate the usefulness of analysts’ recommendations to investors in generating excess returns. Support your answer with empirical evidence available in the literature.
6. “Common stocks are expected to hedge against inflation; therefore, in a perfect market, return on common equity should keep pace with the inflation rate.” (Luintel and Paudyal, 2006, p. 1). Discuss how the return on common stocks could be related to inflation and comment on whether empirical evidence documented in the literature supports this prediction.
2023-01-04