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Unformatted text preview: X (i.e., such that E [ Y  X = 1] = E [ Y  X = 2] = E [ Y ] ). 2. Suppose that the rate of return on the stock of XYZ plc is observed to follow a martingale process. Explain what this means in terms of the properties of the rate of return over time. What can be inferred from this observation about the efciency or inefciency of the market for the stock of XYZ plc? 3. If every appraisal of asset market efciency depends on a model of asset prices, what criteria should be used to choose the model? 4. Discuss the theoretical and empirical signicance of the hypothesis that stock market prices follow a random walk. 5. Discuss the strengths and weaknesses of event studies in appraising asset market efciency. *****...
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 Spring '11
 CRABBE

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