For each question/sub question, state if it is True/False/Uncertain. Explain using equations where needed.

1) Evidence for reduced stock-market risk at long horizons is evidence against weak-form market efficiency.

2) The stock of Zoom Video Communications has multiplied by five in the year 2020.

a) You realise stocks are sometimes overvalued and you are certain this is the case with Zoom. There is a short selling strategy to take advantage of this knowledge and it is certain to make profits. Explain the short-selling strategy and say if it does or does not offer profits with certainty.

b) Furthermore, being a software development enthusiast you know of a new publicly traded well funded company called LIFT that is about to hit the market with a much better software for remote teaching. You conjecture that as a consequence Zoom shares will go down even further while prices of LIFT will go up. There is a short- selling strategy that is more likely to offer profits than in part a). Explain the short-selling strategy and why it does or does not offer certain profits.

3) Consider two mean-variance investors who are not leverage constrained, they can invest in a safe asset and two stocks. If their risky portfolio holds different shares of each stock it must be that they have different risk aversion.