Asked by Samantha Adams on May 01, 2024
Verified
Value stocks may provide investors with better returns than growth stocks if:
I. Value stocks are out of favor with investors.
II. Prices of growth stocks include premiums for overly optimistic growth levels.
III. Value stocks are likely to generate positive-earnings surprises.
A) I only
B) II only
C) I and III only
D) I, II, and III
Positive-earnings Surprises
Situations where the reported earnings of a company exceed the expected earnings, often leading to a positive reaction in the stock market.
Overly Optimistic
This term refers to an excessive belief in the favorable outcomes of events or conditions, often disregarding the likelihood of negative outcomes.
- Understand the significance of value and growth stocks, including their characteristics and how they may affect investor returns.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
D
Explanation :
Value stocks may provide better returns than growth stocks if they are currently out of favor (I), implying potential for revaluation; if growth stocks are overpriced due to overly optimistic expectations (II), suggesting they might underperform if those expectations are not met; and if value stocks are likely to generate positive earnings surprises (III), which could lead to upward price adjustments as the market reacts to the new information.
Learning Objectives
- Understand the significance of value and growth stocks, including their characteristics and how they may affect investor returns.