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Question 1
Solve the following equations:
1 = 0.25 + 0.2 + x + y
1 = 0.25*0.8 + 0.2*1.3 + x*1.5 +y*0
(i)
$343,333
(ii)
$206,667
(iii)
0
Question 2
Expected Return A = 10.8%
Expected Return B = 9.33%
Standard Deviation A = 3.8%
Standard Deviation B = 12.02%
Covariance A and B = 45.39(%)
2
Correlation Coefficient A and B = 0.993
Question 3
a)
This reaction is not and evidence that the Argentinean stock market is not semistrong form
efficient. By the contrary, the fact that the price of the stock adjusted quickly (only minutes after
the announcement) suggests that the market is semistrong form efficient. The fact that the
price increased, rather than decreased would only mean that the investors considered this to be
positive news to the firm.
b)
Being the market semistrong form efficient, the price already incorporated the effects coming
from the change in management of the company. Therefore, all the abnormal returns coming
from this information have already been exploited. So future investors of this company will not
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 Three '11
 jaffe

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