Question 1 Part A. What are the two key assumptions of the efficient market hypothesis? I. Rational investors collect information and compete for profits II. Any temporary mispricing would be...





Question 1


Part A. What are the two key assumptions of the efficient market hypothesis?
I.  Rational investors collect information and compete for profits
II. Any temporary mispricing would be arbitraged away
III. Irrationality: Investors make mistakes when forming expectations or making investment decisions
IV. The mispricing might not be quickly eliminated because of limits to arbitrage







a) I and II



b) II and IV



c) III and IV



d) I and III




Part B. What are the two key assumptions of behavioral asset pricing theory?
I.  Rational investors collect information and compete for profits
II. Any temporary mispricing would be arbitraged away
III. Irrationality: Investors make mistakes when forming expectations or making investment decisions
IV. The mispricing might not be quickly eliminated because of limits to arbitrage




a) II and IV



b) I and III



c) III and IV



d) I and II








Jun 10, 2022
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