Word count: 1500
Submission deadline: 26.11.2020
Module learning outcomes tested:
LO1 Display and apply extensive detailed knowledge of capital markets, long term finance and
understand the concept and implications of market efficiency
LO3 Critically review the validity of arguments in support of theoretical models such as the capital asset pricing model and investigate contradictory evidence.
LO5 Provide a balanced argument relating to issues in finance, derive a logical conclusion and
You are required to produce a report consisting of two parts.
In Part 1, you should explain the three forms of market efficiency put forward by Fama (1970). (15 marks)
In Part 2, you should proceed with critically discussing the evidence for and against the theory that stock market share prices fully and fairly reflect all known information. Give your own reasoned evaluation of the balance of this evidence and your views on whether it is possible to exploit market inefficiencies to consistently make abnormal returns by trading in shares using publicly available information. Go on to explain the implications for investors and companies if it were concluded that the evidence supporting the efficient stock market hypothesis was very persuasive as far as past price and publicly available information is concerned. (85 marks)