# 貨幣銀行學 chapter 7
###### tags: `貨幣銀行學`
## The stock market, the theory of rationed expectations, and the efficient market hypothesis
## background
:::warning
* 理性預期(the theory of rational expectation)
* 效率市場假設(efficient market hypothesis)
* stockholders are residual claimants
net earning :arrow_right: residual :arrow_right: dividends :arrow_right: cash flows
:::

## learning object
1. the price of common stock
2. the impact of new information on stock prices
3. ==adaptive expectation(適應性預期)== v.s ==rational expectation(理性性預期)==
4. ==arbitrage opportunity(套利)== and efficient market hypothesis(EMH)
5. behavior financial and EMH(行為財務學)
## basic principle of finance
the value of any investment is calculated by computing the ==present value== of all ==cash flow== that the investment will generate over its useful life
## one - period valuation model
1. a "theory" of how the current price of a stock is determined
2. a reasonable formula for pricing is
:::danger
When we plan to purchase the stock do we know Div~1~ ?
**no**　
When we plan to purchase the stock do we know P~1~ ?
**no**
Can we know k~e~ ?
**Yes** Actually, the investor decides k~e~ by themselves.
:::

:::info
3. example
* you want k~e~ =12%
* you are told that D~1~ = 0.16
* you forecast that P~1~ = 60
* p~0~ = 53.71
* if the market price = 50
* yo buy it
:::

## the generalized dividends valuation model
1. the formula
when n is large
expectation toward
D~1~ D~2~ ..........
very hard to expect
## the Gordon growth model
instead of forecasting D~1~ D~2~ ..........
the Gordon growth model assumes constant dividends growth
1. the formula
if we desire r =5%
p/d=20(pe ratio)
if market pe ratio < 20
buy
反之
## an example of car auction(拍賣)
:::info
1. two buyer A and B(會修車)
the price in your mind A=5000 b=7000
run 1
A 4000 B 4500
run 2
A 5000 B 5100
B win
:::

3. price is set by the buyer willing to pay the highest price
4. the price is set by the buyer who can take best advantage of the asset
5. superior information about an asset can increase its value by reducing its perceived risk.
## the lesson about information applies to the stock markets
1. information is important for ==individuals to value== each stock
2. information change :arrow_right: price change(ex 財報)
3. information change frequently :cyclone:
:arrow_right_hook: the stock price changes frequently
1.

| investor | required discount rate | stock price in mind |
| ---------------------- | ---------------------- | ------------------- |
| you | 15% | 16.7 |
| knows something inside | 12% | 22.22 |
| the ceo | 10% | 28.28 |
:::success
uncertainty level: you>Ksi>ceo
:::
## Monetary policy and stock price
1. 
:::success
1. **interest rate** :arrow_down: then **r** :arrow_down: then **p** :arrow_up:
2. **interest rate** :arrow_down: then **investment** :arrow_up:
**stimulate economy** then**g** :arrow_up: then **P** :arrow_up:
3. in sum interest rate :arrow_down: then asset price :arrow_up:

:::
## global financial crisis and the stock market
1. Dow Jones Industry Average

| 14066 | 6547 | 27781 |
| ----- | ---- | --------- |
| 2007 | 2009 | 2009(end) |
## Adoptive expectation (適應性預期)
1. bass on past information only
2. change in expectation will occur
slowly over time as data change
## rational expectation
1. expectation will be identical to the optional forecast using all(best guess) available information

:::info
example
1. in rush hour, Joe's driving time for 30 mins.
in rush hour, additional 10 mins are necessary
3. if Joe leaves in rush hours
(driving time)^e^=35 min **adaptive expectation** (30 40 取平均)
(driving time)^e^=40 min **rational expectation** (30 加 10 )
:::
2. even in a rational expectation it may be ==perfectly accurate==
:::danger
Why?
it take effort to make expectation
the predictor is unaware of some relevant information
:::
## Formal statement of rational expectation
==**X^e^ =X^of^**==
of :optimal forecast using all information
## rationale behind the theory
people with better forecasts get rich
## since rational expectation are optimal forecast
1. average ==expectation errors== are **zero**
2. expectation errors cannot be predict
## Efficient market hypothesis
1. consider
2. rational expectation = optimal forecast
==P^e^~t+1~ =p^of^~t+1~ :arrow_right: R^e^ =R^of^==
4. if we have a good theory based on supply and demand ==R^of^=R^*^==*
## Return equation again
同上公式e 轉 of
1. don't take p~t~as given R^of^ affect p~t~
2. the current process reflects all available information
## the rational behind the hypothesis is that

unexploited profit will be eliminated

## Random walk
future change in stock prices should be unpredictable since the current prices already reflect all information