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Chapter 07 - Stock Price Behavior and Market Efficiency

Chapter 7
Stock Price Behavior and Market
Efficiency
Slides:
7-1. Title Slide
7-2. Learning Objectives
7-3. The Market
7-4. Controversy, Intrigue, and Confusion
7-5. Market Efficiency
7-6. What Does “Beat the Market” Mean?
7-7. Three Economic Forces that Can Lead to Market Efficiency
7-8. Forms of Market Efficiency, (i.e., what information is used?)
7-9. Information Sets for Market Efficiency
7-10. Why Would a Market be Efficient?
7-11. Some Implications of Market Efficiency: Does Old Information Help Predict
Future Stock Prices?
7-12. Some Implications of Market Efficiency: Random Walks and Stock Prices
7-13. Random Walks and Stock Prices, Illustrated.
7-14. How New Information Gets into Stock Prices, I.
7-15. How New Information Gets into Stock Prices, II.
7-16. Event Studies, I.
7-17. Event Studies, II.
7-18. Event Studies, III.
7-19. Event Studies, IV.
7-20. Event Studies, V.
7-21. Event Studies, VI.
7-22. Event Studies, VII.
7-23. Informed Traders and Insider Trading, I.
7-24. Informed Traders and Insider Trading, II.
7-25. Informed Trading
7-26. Legal Insider Trading
7-27. Who is an “Insider”?
7-28. Illegal Insider Trading
7-29. It’s Not a Good Thing: What did Martha do? (Part 1)
7-30. It’s Not a Good Thing: What did Martha do? (Part 2)
7-31. Are Financial Markets Efficient, I?
7-32. Are Financial Markets Efficient, II?
7-33. Some Implications if Markets are Efficient
7-34. Market Efficiency and the Performance of Professional Money Managers, I.
7-35. Market Efficiency and the Performance of Professional Money Managers, II.
7-36. Market Efficiency and the Performance of Professional Money Managers,
III.
7-37. Market Efficiency and the Performance of Professional Money Managers,
IV.
7-38. Market Efficiency and the Performance of Professional Money Managers, V.
7-39. Market Efficiency and the Performance of Professional Money Managers,
VI.
7-40. Market Efficiency and the Performance of Professional Money Managers,
VII.

7-1
Chapter 07 - Stock Price Behavior and Market Efficiency

7-41. Market Efficiency and the Performance of Professional Money Managers,

VIII.
7-42. Market Efficiency and the Performance of Professional Money Managers,
IX.
7-43. What is the Role for Portfolio Managers in an Efficient Market?
7-44. Anomalies
7-45. The Day-of-the-Week Effect: Mondays tend to have a Negative Average
Return
7-46. The Amazing January Effect, I.
7-47. The Amazing January Effect, II.
7-48. The Turn-of-the-Year Effect, I.
7-49. The Turn-of-the-Year Effect, II.
7-50. The Turn-of-the-Month Effect, I.
7-51. The Turn-of-the-Month Effect, II.
7-52. Bubbles and Crashes
7-53. The Crash of 1929
7-54. The Crash of 1929—The Aftermath
7-55. The Crash of 1987
7-56. The Crash of 1987—Aftermath
7-57. Circuit Breakers
7-58. The Asian Crash
7-59. The Asian Crash—Aftermath
7-60. The “Dot-Com” Bubble and Crash, I
7-61. The “Dot-Com” Bubble and Crash, II
7-62. The Crash of October 2008
7-63. The Dow Jones Average, January 2008 through April 2010
7-64. Chapter Review, I.
7-65. Chapter Review, II.

Chapter Organization
7.1 Introduction to Market Efficiency
7.2 What does “Beat the Market” Mean?
7.3 Foundations of Market Efficiency
7.4 Forms of Market Efficiency
7.5 Why Would a Market Be Efficient?
7.6 Some Implications of Market Efficiency
A. Does Old Information Help Predict Future Stock Prices?
B. Random Walks and Stock Prices
C. How Does New Information Get into Stock Prices?
D. Event Studies
7.7 Informed Traders and Insider Trading
A. Informed Trading
B. Insider Trading
7.8 How Efficient are Markets?
A. Are Financial Markets Efficient?
B. Some Implications of Market Efficiency
7.9 Market Efficiency and the Performance of Professional Money
Managers
7.10 Anomalies

7-2
Chapter 07 - Stock Price Behavior and Market Efficiency

A. The Day-of-the-Week Effect

B. The Amazing January Effect
C. Turn-of-the-Year Effect
D. Turn-of-the-Month Effect
E. The Earnings Announcement Puzzle
F. The Price-Earnings (P/E) Puzzle
7.11 Bubbles and Crashes
A. The Crash of 1929
B. The Crash of October 1987
C. The Asian Crash
D. The “Dot-Com” Bubble and Crash
E. The Crash of October 2008
7.12 Summary and Conclusions

Selected Web Sites

 www.e-m-h.org/ (for information on market efficiency)
 www.zakon.org/robert/internet/timeline (documentation of the growth of the
internet)

Annotated Chapter Outline

7.1 Introduction to Market Efficiency

Market efficiency: Relation between stock prices and information

available to investors indicating whether it is possible to "beat the market;"
if a market is efficient, it is not possible except by luck.

Efficient market hypothesis (EMH): Theory asserting that, as a practical

matter, the major financial markets reflect all relevant information at a
given time.

The primary question is: Can you, or can anyone, consistently "beat the market?"
(Note that the duck on slide 7-5 is trying to “beat the market” with his hammer. In
PowerPoint 2007, the duck is animated (This is the only animated slide in the
supplements). The duck attempts to beat the market, but fails. This is intended to
provide a bit of levity to the subject.)

7.2 What does “Beat the Market” Mean?

Excess return: A return in excess of that earned by other investments

having the same risk.

7-3
Chapter 07 - Stock Price Behavior and Market Efficiency

To judge if an investment "beat the market," we need to know if the return was
high or low relative to the risk involved. We need to determine if the investment
has earned a positive excess return in order to say it "beat the market."

7.3 Foundations of Market Efficiency

Three economic forces can lead to market efficiency. These conditions are so
powerful that any one of them can result in market efficiency.

These conditions are:

1. Investor Rationality. If every investor always made perfectly rational

investment decisions, earning an excess return would be difficult. If everyone is
fully rational, equivalent risk assets would all have the same expected returns.
Put differently, no bargains would be there to be had, because relative prices
would all be correct.

2. Independent Deviations from Rationality. Even if the investor rationality

condition does not hold, the market could still be efficient. Suppose that many
investors are irrational, and a company makes a relevant announcement about a
new product. Some investors will be overly optimistic, while some will be overly
pessimistic, but the net effect might be that these investors cancel each other
out. In a sense, the irrationality is just noise that is diversified away. As a result,
the market could still be efficient (or nearly efficient). What is important here is
that irrational investors do not have similar beliefs.

3. Arbitrage. Suppose there are many irrational traders and further suppose that
their collective irrationality does not balance out. In this case, observed market
prices can be too high or too low relative to their risk. Now suppose there are
some well-capitalized, intelligent, and rational investors. This group of traders
would see these high or low market prices as a profit opportunity and engage in
arbitrage—buying relatively inexpensive stocks and selling relatively expensive
stocks. If these rational arbitrage traders dominate irrational traders, the market
will still be efficient. We sometimes hear the expression “Market efficiency
doesn’t require that everybody be rational, just that somebody is.”

Lecture Tip. Students, like all of us, look at the world through their own
experiences. They have met some irrational people in their lives. It is easy for
them to think that these irrational people could be representative investors and
that market efficiency simply cannot hold because of investor irrationality.

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Chapter 07 - Stock Price Behavior and Market Efficiency

7.4 Forms of Market Efficiency

Weak-form efficient market: A market in which past prices and volume

figures are of no use in beating the market.

Semistrong-form efficient market: A market in which publicly available

information is of no use in beating the market.

Strong-form efficient market: A market in which information of any kind,

public or private, is of no use in beating the market.

"A market is efficient with respect to some particular information if that

information is not useful in earning a positive excess return." So, a market can
only be determined to be efficient with respect to specific information. The three
forms include:

• Weak-form efficiency, with respect to information reflected in past price

and volume figures.

• Semistrong-form efficiency, with respect to any publicly available

information.

• Strong-form efficiency, with respect to any information, both public and

private.

To be clear, if the information allows an investor to earn excess returns on an

investment, the market is not efficient with respect to that information. Therefore,
if an investor uses past price information to earn an excess return, then the
market is not weak-form efficient. If an investor uses a firm's financial statements
to earn an excess return, the market is not semistrong-form efficient. Finally, if an
investor uses inside information to earn an excess return, the market is not
strong-form efficient.

7.5 Why Would a Market Be Efficient?

The driving force toward market efficiency is simply competition and the profit
motive.

Consider a large mutual fund such as the Fidelity Magellan Fund (one of the
largest equity funds in the United States, with about $45 billion under
management). Suppose Fidelity was able, through its research, to improve the
performance of this fund by 20 basis points for one year only. How much would
this one-time 20-basis point improvement be worth?

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Chapter 07 - Stock Price Behavior and Market Efficiency

The answer is 0.0020 times $45 billion, or $90 million. Thus, Fidelity would be
willing to spend up to $90 million to boost the performance of this one fund by as
little as one-fifth of 1 percent for a single year only.

This example shows that even relatively small performance enhancements are
worth tremendous amounts of money and thereby create the incentive to unearth
relevant information and use it.

7.6 Some Implications of Market Efficiency

If markets are efficient:

• Security selection is less important; investors may as well hold index funds
to minimize their costs.

• There is little need for professional money managers.

• Investors should not try to time the market. (In fact, successful market
timing is very difficult to achieve, even ignoring market efficiency.)

Lecture Tip: It may be helpful to restate the implications of market efficiency with
respect to the forms of market efficiency, as follows:

• Weak-form efficiency: If weak-form efficiency holds, then technical

analysis is of no use, and the efforts of technical analysts are of no benefit
to investors.

• Semistrong-form efficiency: If semistrong-form efficiency holds, then

fundamental analysis using publicly available information is of no benefit,
and most of the financial analysts and mutual fund managers are not
providing any value.

• Strong-form efficiency: If strong-form efficiency holds, then inside

information is of no value, suggesting that there should be no restrictions
on insider trading.

A. Does Old Information Help Predict Future Stock Prices?

In its weakest form, the efficient market hypothesis is the simple statement that
stock prices fully reflect all past information. If this is true, this means that
studying past price movements in the hopes of predicting future stock price
movements is really a waste of time.

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Chapter 07 - Stock Price Behavior and Market Efficiency

There is also a very subtle prediction at work here. That is, no matter how often a
particular stock price path has related to subsequent stock price changes in the
past, there is no assurance that this relationship will occur again in the future.

Researchers have used sophisticated statistical techniques to test whether past

stock price movements are of any value in predicting future stock price
movements. This turns out to be a surprisingly difficult question to answer clearly
and without qualification. In short, although some researchers have been able to
show that future returns are partly predictable by past returns, the predicted
returns are not economically important, which means that predictability is not
sufficient to earn an excess return.

In addition, trading costs generally swamp attempts to build a profitable trading

system on the basis of past returns. Researchers have been unable to provide
evidence of a superior trading strategy that uses only past returns. That is,
trading costs matter, and buy-and-hold strategies involving broad market indexes
are extremely difficult to outperform.

B. Random Walks and Stock Prices

Ask your students whether stock market prices are predictable: many of them will
say yes. To their surprise, it is very difficult to predict stock market prices. In fact,
considerable research has shown that stock prices change through time as if
they are random. That is, stock price increases and decreases are equally likely.

When the path that a stock price follows shows no discernible pattern, then the
stock’s price behavior is largely consistent with the notion of a random walk. A
random walk is related to the weak-form version of the efficient market
hypothesis because past knowledge of the stock price is not useful in predicting
future stock prices.

We illustrate daily price changes for Intel stock in the text. These daily price
changes are not truly a random walk. To qualify as a true random walk, Intel
stock price changes would have to be independent and identically distributed.
Still, the graph of daily price changes for Intel stock is essentially what a random
walk looks like. It is certainly hard to see any pattern in these daily price changes.

C. How Does New Information Get into Stock Prices?

In its semistrong form, the efficient market hypothesis is the simple statement
that stock prices fully reflect publicly available information. Stock prices change
when traders buy and sell shares based on their view of the future prospects for
the stock. The future prospects for the stock are influenced by unexpected news
announcements. Prices can adjust to news announcements in three ways:

7-7
Chapter 07 - Stock Price Behavior and Market Efficiency

• Efficient market reaction: The price instantaneously adjusts to, and

fully reflects, new information. There is no tendency for subsequent
increases or decreases to occur.

• Delayed reaction: The price partially adjusts to the new information,

but days elapse before the price completely reflects new information.

• Overreaction and correction: The price over-adjusts to the new

information; it overshoots the appropriate new price but eventually
falls to the new price.

D. Event Studies

We have included an event study for Advanced Medical Optics, Inc. (EYE) in the
text. On Friday, May 25, 2007, executives of Advanced Medical Optics Inc.
recalled a contact lens solution called Complete MoisturePlus Multi Purpose
Solution. The company took this voluntary action after the Centers for Disease
Control and Prevention (CDC) found a link between the solution and a rare
cornea infection called acanthamoeba keratitis, or AK for short.

Executives at Advanced Medical Optics chose to recall their product even though
they did not find evidence their manufacturing process introduced the parasite
that can lead to AK.

Researchers use a technique known as an event study to test the effects of news
announcements on stock prices.

It has been our experience that students really like to get a glimpse of an “actual”
technique used by finance researchers. You will note that we strove to focus our
exposition on the reaction to the news, rather than the methods of event studies.

7.7 Informed Traders and Insider Trading

Recall that if a market is strong-form efficient, no information of any kind, public

or private, is useful in beating the market. However, inside information of many
types clearly would enable you to earn essentially unlimited returns. This fact
generates an interesting question: Should any of us be able to earn returns
based on information that is not known to the public?

In the United States (and in many other countries, though not all), making profits
on nonpublic information is illegal. This ban is said to be necessary if investors
are to have trust in U.S. stock markets. The United States Securities and
Exchange Commission (SEC) is charged with enforcing laws concerning illegal
trading activities.

7-8
Chapter 07 - Stock Price Behavior and Market Efficiency

As a result, we present the distinctions among informed traders, illegal insider

trading, and legal insider trading.

A. Informed Trading

When an investor makes a decision to buy or sell a stock based on publicly

available information and analysis, this investor is said to be an informed trader.
The information that an informed trader possesses might come from reading The
Wall Street Journal, reading quarterly reports issued by a company, gathering
financial information from the Internet, talking to other traders, or a host of other
sources.

Lecture Tip. You will notice that we do not talk about noise traders here. We left
them out here because the focus of this section is on information. Talking about
noise traders (and their lack of information) could deflect the discussion away
from information and the types of information-based trades.

B. Insider Trading

Illegal Insider Trading: For the purposes of defining illegal insider trading, an
insider is someone who possesses material nonpublic information. Such
information is both not known to the public and, if it were known, would impact
the stock price. A person can be charged with insider trading when he or she
acts on such information in an attempt to make a profit.

Legal “Insider Trading”: A company’s corporate insiders can make perfectly

legal trades in the stock of their company. To do so, they must comply with the
reporting rules made by the U.S. Securities and Exchange Commission. When
they make a trade and report it to the SEC, these trades are reported to the
public. In addition, corporate insiders must declare that trades that they made
were based on public information about the company, rather than “inside”
information. Most public companies also have guidelines that must be followed.

It’s Not a Good Thing: What did Martha Do? Martha Stewart was accused, but
not convicted, of insider trading. She was accused, and convicted, of obstructing
justice and lying to investigators.

7.8 How Efficient are Markets?

A. Are Financial Markets Efficient?

There are four reasons why market efficiency is difficult to test:

• The risk-adjustment problem
• The relevant information problem
• The dumb luck problem

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Chapter 07 - Stock Price Behavior and Market Efficiency

• The data snooping problem

There are three generalities based on research that are relevant to market
efficiency:
• Short-term stock price and market movements are very difficult to predict
with accuracy.

• The market reacts quickly and sharply to new information. There is little
evidence that a market under (or over) reaction can be profitably
exploited.

• If the stock market can be beaten, it is not obvious, so this implies that the
market is not grossly inefficient.

B. Some Implications of Market Efficiency

Even if all markets are efficient, asset allocation is still important because the
risk-return tradeoff still holds.

7.9 Market Efficiency and the Performance of Professional Money

Managers

There have been a number of studies that compare the performance of mutual
fund managers with market indices. The results of almost every study indicate
that the market indices outperform the mutual fund managers. This is further
evidence in favor of market efficiency. Mutual fund managers should be experts
in technical and fundamental analysis, and they should be able to use these tools
to earn excess returns, if anybody can.

Lecture Tip: An interesting study by Fortin and Michelson [Journal of Financial

Planning, February 1999] compares the performance of a large sample of mutual
funds categorized by investment objective, to their respective market indexes.
For example, growth funds were compared to the S&P 500, corporate bond
funds were compared to the Lehman Brothers Corporate Bond index,
international funds were compared to the Morgan Stanley EAFE index, and small
company equity funds were compared to the Wilshire 2000. This study found
that, on average, the benchmark indices significantly outperformed the mutual
funds for all fund categories but one. The one category that the funds
outperformed the index was small company equity funds. Apparently the fund
managers are able to exploit enough market inefficiencies in the small firm equity
market to allow excess returns to accrue.

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Chapter 07 - Stock Price Behavior and Market Efficiency

7.10 Anomalies

In this section, several well-known market anomalies are discussed: the Day-of-
the-week effect; the amazing January effect (and two of its extensions), and;
Bubbles and Crashes (including the Market Crashes of 1929, 1987, the Asian
Crash, and the “Dot-Com Bubble and Crash).

A. The Day-of-the-Week Effect

Day-of-the-week effect: This is the term for the tendency for Monday to
have a negative average return.

Table 7.2 shows the day-of-the-week effect, which indicates that Monday is the
only day with a negative average return. Notice that Friday has a high positive
return. This effect is statistically significant, but it is difficult to exploit it to earn a
positive excess. About all we can do is use this in our trading decisions;
purchase a stock late on Monday and sell our stocks late on Friday.

B. The Amazing January Effect

January effect: This is the term for the tendency for small stocks to have
large returns in January.

Figures 7.9a and 7.9b show the results of the January effect. Small stocks tend
to have much higher returns in January, whereas larger stocks (S&P 500) do not
show this result. The bulk of the return occurs in the first few days of January.
The effect is more pronounced for stocks that have significant declines. This
effect exists in most major markets around the world. Two factors are important
in explaining the January effect: tax-loss selling and institutional investors
rebalancing their portfolios.

C. Turn-of-the-Year Effect

Researchers have delved deeply into the January effect to see whether the effect
is due to returns during the whole month of January or to returns bracketing the
end of the year. Table 7.4 shows our calculations concerning this effect. The
returns in the “Turn-of-the-Year Days” category are higher than returns in the
“Rest-of-the-Days” category. Further, the difference is apparent in the 1984-
2009 period. However, the difference was more than twice as large in the 1962-
1983 period.

D. Turn-of-the-Month Effect

Financial market researchers have also investigated whether a turn-of-the-month

effect exists. Table 7.5 shows the results of our calculations. It appears that this
effect was stronger in the 1984-2009 period than in the 1962-1983 period.

7-11
Chapter 07 - Stock Price Behavior and Market Efficiency

E. The Earnings Announcement Puzzle

Researchers have found that it takes days (or even longer) for a market price to
adjust fully to information about earnings surprises. In addition, some
researchers have found that buying stocks after positive earnings surprises is a
profitable investment strategy.

F. The Price-Earnings (P/E) Puzzle

The P/E ratio is widely followed by investors and is used in stock valuation.
Researchers have found that, on average, stocks with relatively low P/E ratios
outperform stocks with relatively high P/E ratios, even after adjusting for other
factors, like risk. Because a P/E ratio is publicly available information, it should
already be reflected by stock prices. However, purchasing stocks with relatively
low P/E ratios appears to be a potentially profitable investment strategy.

7.11 Bubbles and Crashes

A bubble occurs when market prices soar far in excess of what normal and
rational analysis would suggest. Investment bubbles eventually pop because
they are not based on fundamental values. When a bubble does pop, investors
find themselves holding assets with plummeting values.

A crash is a significant and sudden drop in market wide values. Crashes are
generally associated with a bubble. Typically, a bubble lasts much longer than a
crash. A bubble can form over weeks, months, or even years. Crashes, on the
other hand, are sudden, generally lasting less than a week. However, the
disastrous financial aftermath of a crash can last for years.

A. The Crash of 1929

Although the Crash of 1929 was a large decline, it pales with respect to the
ensuing bear market. As shown in Figure 7.11, the DJIA rebounded about 20
percent following the October 1929 crash. However, the DJIA then began a
protracted fall, reaching the bottom at 40.56 on July 8, 1932. This level
represents about a 90 percent decline from the record high level of 386.10 on
September 3, 1929. By the way, the DJIA did not surpass its previous high level
until November 24, 1954, more than 25 years later.

B. The Crash of October 1987

NYSE circuit breakers: This is the name for rules that kick in to slow
trading when the DJIA declines by more than a preset amount in a trading
session. In fact, if the DJIA declines far enough, trading will halt.

7-12
Chapter 07 - Stock Price Behavior and Market Efficiency

On October 19, 1987 (Black Monday) the Dow plummeted 500 points to 1,700
with about $500 billion in losses that day. There are several explanations for
what happened:

• Irrational investors bid up stock prices and the bubble popped.

• Markets were volatile, the economy was shaky, and Congress was in
session considering anti-takeover legislation.

• Program trading quickly created very large sell orders.

Interestingly, the market recovered very quickly. The market was up in 1987 and
the bull market continued for many years after the crash. As a result of the crash,
NYSE circuit breakers were introduced. These circuit breakers required trading
halts based upon 10, 20, and 30 percent declines in the DJIA. The trading halts
vary from 30 minutes, to two hours, to the rest of the trading day.

C. The Asian Crash

The crash of the Nikkei Index, which began in 1990, lengthened into a
particularly long bear market. It is quite like the Crash of 1929 in that respect. In
three years from December 1986 to the peak in December 1989, the Nikkei 225
Index rose 115 percent. Over the next three years, the index lost 57 percent of its
value. In April 2003, the Nikkei Index stood at a level that was 80 percent
off its peak in December 1989.

D. The “Dot-Com” Bubble and Crash

By the mid-1990s, the rise in Internet use and its international growth potential
fueled widespread excitement over the “new economy.” Investors did not seem to
care about solid business plans—only big ideas. Investor euphoria led to a surge
in Internet IPOs, which were commonly referred to as “dot-coms” because so
many of their names ended in “.com.” Of course, the lack of solid business
models doomed many of the newly formed companies. Many of them suffered
huge losses and some folded relatively shortly after their IPOs.

The Amex Internet Index soared from a level of 114.60 on October 1, 1998, to its
peak of 688.52 in late March 2000, an increase of about 500 percent. The Amex
Internet Index then fell to a level of 58.59 in early October 2002, a drop of about
91 percent. By contrast, the S&P 500 Index rallied about 31 percent in the same
1998–2000 time period and fell 40 percent during the 2000–2002 time period.

7-13
Chapter 07 - Stock Price Behavior and Market Efficiency

E. The Crash of October 2008

Although still under debate, many agree that one of the underlying causes of the
crash of 2008 was excess liquidity, which allowed unworthy borrowers to obtain
financing, primarily for mortgages. Moreover, much of this was done at low
“teaser rates.” When these rates reset, require payments increased, resulting in
bankruptcies for these so-called subprime loans. If house prices had continued to
climb, borrowers could have refinanced, avoiding trouble. However, this did not
happen.

7.12 Summary and Conclusions

7-14
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 Transcriber’s Note
This transcription follows the text of the edition published by
Robert M. McBride & Company in 1919. The following alterations
have been made to correct what are believed to be unambiguous
printer’s errors:
“inheritence” to “inheritance” (Ch. I);
“anum” to “annum” (Ch. I);
“testatively” to “tentatively” (Ch. IV);
“noncommital” to “noncommittal” (Ch. IV);
“hershe” to “herself” (Ch. IV);
“irration” to “irritation” (Ch. IX);
“negotations” to “negotiations” (Ch. X);
“undveloped” to “undeveloped” (Ch. XI);
“possesssion” to “possession” (Ch. XII);
“thicker than flees” to “thicker than fleas” (Ch. XIII);
“satisisfaction” to “satisfaction” (Ch. XIII);
“tremondous” to “tremendous” (Ch. XIV);
“gussed” to “guessed” (Ch. XIV);
“comfortabe” to “comfortable” (Ch. XIV);
“nervelesly” to “nervelessly” (Ch. XV);
“tumultous” to “tumultuous” (Ch. XV);
“caught up the try” to “caught up the tray” (Ch. XV);
“purposly” to “purposely” (Ch. XVII);
“organizatin” to “organization” (Ch. XVII);
“innividual” to “individual” (Ch. XVII);
“susided” to “subsided” (Ch. XVII);
“comosed” to “composed” (Ch. XVII);
“adressing” to “addressing” (Ch. XVIII);
“serenly” to “serenely” (Ch. XIX);
“scarely” to “scarcely” (Ch. XIX);
“dependant” to “dependent” (Ch. XX);
“interupted” to “interrupted” (Ch. XXII);
“wondeful” to “wonderful” (Ch. XXII);
“accuresd” to “accursed” (Ch. XXII);
 “twenty-eigth” to “twenty-eighth” (Chs. XXIII & XXVII);
“wthout” to “without” (Ch. XXVII).

Any other apparent errors and/or inconsistencies have been

preserved.
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