《bank,money课件》HO_MB2e_ch06.pptVIP

* * * * * * * * Teaching Tips: Have students calculate the rate of return for a specific stock over the previous year by obtaining data including the price one year ago, the current price, and the dividend paid. * * * * The ellipsis ( ...) indicates that the dividend payments continue forever. * * * * * * * * * * * Teaching Tips: Choose a stock that has recently reported earnings that have increased but less than expected. Ask students to consider how they think the stock price responded since earnings increased compared to the previous year. Next, let them know what the forecasted earnings per share were, on average (for example, see to find the average forecast). Continue the discussion. Students should see how the stock price already incorporated expected future earnings and responded to new information that was not included in the forecast. * * * * * * * * * Teaching Tips: Ask the students what type of buying and selling strategy the investor should follow when stocks are above their fundamental values, and when stocks are below their fundamental values. * Note: Economists skeptical of the efficient markets hypothesis have argued, though, that the new information that became available to investors was not sufficient to account for the size of the decline in stock prices. * * 6.3 Learning Objective Explain the connection between the assumption of rational expectations and the efficient markets hypothesis. Rational Expectations and Efficient Markets Adaptive expectations: People make forecasts of future values of a variable using only past values of the variable. Expectations are important in the economy because many transactions require participants to forecast the future. Adaptive Expectations versus Rational Expectations Rational expectations: People make (optimal) forecasts of future values of a variable using all available information. If is the actual stock price and is the optimal forecast, then no one can accurately forecast the size of t