QUESTION

(a) Explain the concept of market efficiency and its importance

(b) (i) Discuss the evidence in relation to weak form market efficiency with reference to the empirical literature

(ii) Describe fully how you would conduct a test of the semi-strong form of the Efficient Market Hypothesis (EMH)

QUESTION

(a) Derive and explain the Capital Market Line. Make as well as state all necessary assumptions

(b) Describe clearly the following stock market anomalies in the finance literature:

(i) Size effect

(ii) January effect and;

(iii) Contrarian Investment Strategy (CIS)

What explanations have been put forward to explain these anomalies?