1) Why are expectations important in understanding how financial instruments are valued?
2) How is it possible that a firm can announce a record-breaking loss, yet its stock price rises when the announcement is made?
3) What is the optimal investment strategy according to the efficient market hypothesis? Why?
4) Explain what the market reaction will be in an efficient market if a firm announces a fully anticipated filing for bankruptcy.
5) How do loss aversion, overconfidence of investors, and social contagion affect market efficiency?
