James@Houston Wrote: ------------------------------------------------------- > happyking02 Wrote: > -------------------------------------------------- > ----- > > Which of the following regarding the > relationship > > between stock prices and changes in the growth > of > > the money supply is least accurate? Changes in > the > > growth of the money supply: > > > > A) affect the size effect in stock returns. > > > > B) do not affect the value effect in stock > > returns. > > > > C) affect the growth of the economy. > > > B can you explain on this one, please? Thanks.
because Money supply increases, economy expands => stock returns increase So. B is least accurate
Money supply increase => Small cap and low P/E firms shown outperform the market. This is called size effect and value effect in stock return
James@Houston Wrote: ------------------------------------------------------- > happyking02, derswap07, > > Would you please explain briefly the difference of > B & C in this case. It may save me some points in > the exam. Thanks in advance! C because equity forwards are not regulated so are risky because of counterparty risk. So futures are better in case of currency. You might not find many currency futures so have to use forwards in currency case.
cfaboston28 Wrote: > > > C because equity forwards are not regulated so are > risky because of counterparty risk. So futures are > better in case of currency. > > You might not find many currency futures so have > to use forwards in currency case. That makes sense. Tks!
I meant futures are good for equity and forwards are good for currency.