We discussed about different forms of market efficiency.  Briefly describe each of them.  Which form of efficiency do you consider closer to what happens in the real world and why?

(b) If markets are efficient, is it possible to consistently beat the market? Why or why not? The Security Market Line depicts the relationship between the beta (risk) and expected returns of stocks. Would an undervalued stock lie below or above the Security Market Line? Explain why.

(c) How would you define a market bubble? Is there any evidence of market imperfections or behavioural biases among investors? Describe one example of a behavioural bias.

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Answer a Three forms of market efficiency are as follows I Weak Form i The three versions of the efficient market hypothesis are varying degrees of the same basic theory The weak form suggests that to... View the full answer