Q$5.$ Define, characterize and explain, in the format given below, the levels of market efficiency

as per the efficient market hypothesis $($given by Fama$)$ and present your views under the

following assumptions under each of the level of efficiency defined $($in the same format given

below$)$;

How would be the observed returns vis a vis market model $($CAPM$)$ based returns on your

investments if the capital markets are in either form of market efficiency mentioned below under

the following two assumptions,

i$.$ assuming that only you have valuable unique information

ii$.$ assuming that you are a fully diversified investor

Justify your answer in each case.

The levels of market

efficiency as per the

efficient market

hypothesis $($given by

Fama$)$

Characterize and

explain the level of

market efficiency as

per the efficient

market definitions

given by Fama

$($Observed returns $-$

CAPM based

expected returns$)$

i$.$ Assuming that

only you have

valuable unique

information

Justify your answer

Observed returns $-$

CAPM based

expected returns

ii$.$ Assuming that

you are a fully

diversified investor

Justify your answer

$($a$)$ Capital

market

being in

absolutely

inefficient

form

$($b$)$ Capital

market

being in

the Weak

form of

market

efficiency

$($c$)$ Capital

Market

being in

the Semi$-$

strong

form of

market

efficiency?

$($d$)$ Capital

market

being in

the Strong

form of

market

efficiency?