*Please help in solving and explaining the following, be detailed and thorough and use own wording not copied info. Thank you!

CHAPTER 11

3. "If all securities are fairly priced, all must offer equal expected rates of return." Comment.

5. At a cocktail party, your co-worker tells you that he has beaten the market for each of the last three years. Suppose you believe him. Does this shake your belief in efficient markets?

7. Why are the following "effects" considered efficient market anomalies? Are there rational explanations for any of these effects?

a. P/E effect.

b. Book-to-market effect.

c. Momentum effect.

d. Small-firm effect.

9. Which of the following (hypothetical) observations would most contradict the proposition that the stock market is weakly efficient? Explain.

a. Over 25% of mutual funds outperform the market on average.

b. Insiders earn abnormal trading profits.

c. Every January, the stock market earns abnormal returns.

CFA Problem 1 (not optional): The semistrong form of the efficient market hypothesis asserts that stock prices:

a. Fully reflect all historical price information.

b. Fully reflect all publicly available information.

c. Fully reflect all relevant information, including insider information.

d. May be predictable.

CFA Problem 2 (not optional): Assume that a company announces an unexpectedly large cash dividend to its shareholders. In an efficient market without information leakage, one might expect:

a. An abnormal price change at the announcement.

b. An abnormal price increase before the announcement.

c. An abnormal price decrease after the announcement.

d. No abnormal price change before or after the announcement.

CHAPTER 12

1. Explain how some of the behavioral biases discussed in the chapter might contribute to the success of technical trading rules.

2. Why would an advocate of the efficient market hypothesis believe that even if many investors exhibit the behavioral biases discussed in the chapter, security prices might still be set efficiently?

3. What sorts of factors might limit the ability of rational investors to take advantage of any "pricing errors" that result from the actions of "behavioral investors"?