Describe the capital asset pricing model, Corporate Finance

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Question 1:

(a) Explain clearly two semi-strong form tests of the Efficient Market Hypothesis (EMH), one supporting and one rejecting the EMH.

(b) Summarise the evidence in relation to strong form market efficiency.

(c) A chartist tells you that he is consistently beating the market. What reservations you may have against such a claim.

Question 2:

(a) Describe the Capital Asset Pricing Model (CAPM).

(b) Critically analyse what happens to the CAPM when the assumptions under which it is derived are relaxed.

(c) What do you meant by the Arbitrage Pricing Theory? In what ways it is a superior model compared to the CAPM? What are its main limitations


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