Wall Street:
In the movie Wall Street, Bud Fox is a broker who conducts trades for Gordon Gekko's firm. Gekko purchases shares of firms he believes are undervalued. Various scenes in the movie offer excellent examples of concepts.
a. Bud Fox comments to Gordon Gekko that a firm's breakup value is twice its market price. What is Bud suggesting in this statement? How would employees of the firm respond to Bud's statement?
b. When Bud informs Gekko that another investor, Mr. Wildman, is secretly planning to acquire a target firm in Pennsylvania, Gekko tells Bud to buy a large amount of this stock. Why?
c. Gekko says, "Wonder why fund managers can't beat the S&P 500? Because they are sheep." What is Gekko's point? How does it relate to market efficiency?