“The Capital Asset Pricing Model [CAPM] assumes that the stock market is dominated by well-diversified investors who are concerned with specific risk. “ is the following statment correct? And explain why.

Which of the below statements does the MM Proposition I predict? A. In a perfect market, the value of a firm is independent of its capital structure B.In a perfect market, the discount rate depends on the capital structure C.In a perfect market, the value of a firm decreases in leverage D.In a perfect market, the NPY of investments depends on the existing debt/equity mix

In theory, should a firm be equally concerned with stand-alone,corporate, and market risk? Would your answer be the same if wesubstituted “In practice” for “In theory”? Explain your answers

Consider the role of financial statement analysis in an efficient capital market, and review empirical evidence on the association between changes in earnings and changes in stock prices

What are the weaknesses of capital market research?

a) Distinguish between systematic risk and unsystematic risk, and explain the significance of the distinction in portfolio analysis. b) Explain what is meant by a share’s beta value. c) Outline the main practical problems in using the CAPM in capital investment decisions. d) Discuss the assumption in CAPM analysis that corporate debt has a zero beta value

1. Which form of market efficiency is the best among weak, semi strong and strong? 2. Is stock market efficient? Give logic in favour of your answer

he concept of market efficiency underpins almost all financial theory and decision models. When financial markets are efficient, the price of a security—such as a share of a particular corporation’s common stock—should be (equal to or more than)     the present value estimate of the firm’s expected cash flows discounted by its appropriate rate of return (also called the intrinsic value of the stock).   Almost all financial theory and decision models assume that the financial markets are efficient. The informational efficiency of financial markets determines the ability of investors to “beat” the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, they will react rapidly as new relevant information becomes available. Financial theorists have identified three levels of informational efficiency that reflect what information is incorporated in stock prices. Identify the form of capital market efficiency under the efficient market hypothesis…

Which of the following is an adequate method of achieving portfolio diversification?   a. Invest in various bonds and stocks.   b. Invest in stocks and real assets of different industries.   c. Invest internationally.   d. All of these.   e. None of these.

Based on the results from Fama and French, does it matter for the Efficient Markets Hypothesis if value stocks are riskier than growth stocks, or if growth stocks are riskier than value stocks? Why or why not?