P$1$

$($a$)$ Explain the implications of the following factors and tests on market efficiency

$($i$)$ Trading costs,

$($ii$)$ Market liquidity

$($iii$)$ Chaos theory

$($iv$)$ Price$-$volume relationship

$[8$ marks$]$

$($b$)$ Outline the implications of the post event announcement drift $($PEAD$)$ on market

efficiency.

$[4$ marks$]$

$($c$)$ Explain what is meant by "excessive volatility" of share prices and the outline the major

criticisms to Shiller $(1981)$ findings.

$[5$ marks$]$

$($d$)$ Outline how the event study methodology may overcome any two of the criticisms in $($i$).$

$($e$)$ Describe any four examples of empirical evidence of the "over$/$under$-$reaction" of share

prices to events.

$[6$ marks$]$

$($f$)$ Outline the key findings in behavioural finance.

$[8$ marks$]$

P$2$

$($a$)$ List the possible asset classes available to an investor in Zambia

$[5$ marks$]$

$($b$)$ Describe the nature of trading on the LuSE

$[3$ marks$]$

$($c$)$ describe any five types of orders one could use on the LuSE

$[5$ marks$]$

$($d$)$ Explain the content of an investment policy statement and the constraints faced in its

implementation by the fund manager of a defined contribution pension fund whose portfolio

is restricted to investment assets domiciled in Zambia.

$($e$)$ Define and write notes on the need to abide by the principles of responsible investing.

$[5$ marks$]$

$($f$)$ What criticisms have arisen regarding the burden of keeping the tag of being classified as

a responsible investor.