Q1: Define the primary and secondary markets.

 Primary markets :

Where the securities are created and first issued.

 Secondary markets :

Where investors buy and sell their securities they already own.

Q2: what is the underpricing phenomenon? and why it’s caused?

Underpricing phenomenon where a company going for initial public offering ( IPO) and the
stock price is below its actual value. How we determine if the stock is underpricing ? we look at
the issued price and the first day of trading ( closing price ) if the closing price is higher than the
issued price these mean the stock is underprice. The cause of these phenomena is information
asymmetry is when one of the parties have the advantage over the other.

Q3: how to calculate the underpricing of an IPO?

The formula for calculating the underprice is [(Pm –Po)/Po]*100 which Pm represents the price of
the closing and Po the issued price. For example, AZYH company issued their stock at the price
89 $ and the closing price is 120 $ the underprice will be [(120 –89)/89]*100 equal 35 %.

Q4: what is the efficient market hypothesis EMH? report the three forms of the EMH.

The hypothesis states that share prices reflect all information.

1. Strong efficient market hypotheses :

says that all information, both public and private, is priced into stocks.

2. Semi strong efficient market hypotheses :

implies that neither fundamental analysis nor technical analysis can provide you
with an advantage.

3. Weak efficient market hypotheses:

claims that prices on traded assets (e.g., stocks, bonds, or property) already reflect
all past publicly available information.
 Q5: test the efficient market hypothesis:
a- choose an event that you think will impact the company stock price due
to the effect of new information.

Seera company is a travel and tourism agents and their stock price was affected by covid-19
pandemic , many countries banned travel .

b- use a line graph to show the movement of the stock price: before, during
and after the event.

prices of stock for 3 months before Prices of stock for 3 months during
covid-19 covid-19
25 25

20 20

15 15

10 10

5 5

0 0
‫ف ف ف ف ف ي ي ي ي ي‬
‫دي دي دي دي دي دي ن ن ن ن ن ا ك ا ك ا ك ا ك ا ك ا ك‬
‫س س س س س س وف وف وف وف وف تو تو تو تو تو تو‬ ‫مار مار مار مار مار مار ب ب ب ب ب نا نا نا نا نا‬
‫مبر مبر مبر مبر مبر مبر مبر مبر مبر مبر مبر بر بر بر بر بر بر‬ ‫ راير راير راير راير راير ير ير ير ير ير‬0‫ س‬0‫ س‬0‫ س‬0‫ س‬0‫ س‬0‫س‬
19 1 9 19 19 1 9 1 9 19 19 1 9 1 9 19 19 1 9 1 9 19 1 9 1 9 2 2 20 2 0 20 0 0 0 0 0 0 2 0 2 0 2 0 2 0 2 0 2
0 0
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 2 20 2 20 2 20 2 20 2 2 2 8 2 2 2 8 2 4 2 0 2
02 08 14 20 24 30 05 11 17 21 27 03 09 15 19 25 31 06 12 16 22 28 03 09 13 19 25 0 0 1 1 2 3

Prices of stock for 3 months after covid-

19
19

18

17

16

15
‫ي‬ ‫ي‬ ‫ي‬ ‫ي‬ ‫ي‬ ‫ف‬ ‫ف‬ ‫ف‬ ‫ف‬ ‫ما ما ما ما ما ما ف‬
‫ن ا نا ن ا ن ا نا‬ ‫ب‬ ‫ب‬ ‫ب‬ ‫ب‬ ‫ب‬ ‫ر ر ر ر ر ر‬
‫ راير راير راير راير راير ير ير ير ير ير‬1‫ س‬1‫ س‬1‫ س‬1‫ س‬1‫ س‬1‫س‬
2 1 2 1 2 1 2 1 2 1 1 1 1 1 1 0 2 02 02 02 02 02
20 20 20 20 20 0 2 0 2 0 2 0 2 0 2 2 2 8 2 4 2 8 2 4 2 0 2
05 11 17 21 27 02 2 08 2 14 2 18 2 24 2 0 0 1 1 2 3

c- based on your observation does the price impacted by the event.

Yes it does, as you can see in the figure during the pandemic the prices kept falling to 13 $.
d- is this consistent with EMH? Why, why not?

Yes it is, because when you work as travel and tourism agents and you get information about a
disease that causes many countries to banned travel this information reflects the price of the
stock as shown in the figure.