Efficient Asset Pricing

Paper, Order, or Assignment Requirements

Financial Investment Analysis.

Assignment One: Efficient Asset Pricing

Background for discussion:

When selecting a portfolio of potential investment opportunities, it is argued that if the market is ‘efficient’ the rational investor should buy equity index mutual funds in an effort to mimic the market at minimal transaction cost, as all relevant ‘news’ information will have already been factored into stock asset prices. However, ‘Behavioural Finance’ proponents dispute assumptions of investor rationality and argue that anomalies to the Efficient Market Hypothesis allow for ‘mispricing’ of assets and the opportunity for abnormal returns.

You are asked to:

  1. Explain and critically evaluate the above statements, drawing upon relevant academic literature.
  2. Discuss whether investors do this in reality. You may refer to recent case study evidence to support your answer.

Your submission:

  • The report should between 1,500 to 2,000 words in length. There will be grading penalties applied for reports that are over or under this word limit.
  • Please see the Module Information Pack for information on late submission policies.
  • Further clarification can be provided in class seminars

Marking criteria:

Marks will be awarded based on the following:

  1. Presentation of assignment and clarity of expression. Presentation should show a polished coherent structure. Thoughts and ideas should be clearly expressed in a fluent academic writing style.
  2. Attention to the purpose of the assignment. The purpose of the assignment should be addressed comprehensively and imaginatively.
  3. Critical analysis of appropriate literature. The assignment should demonstrate an application of critical analysis and arguments should be well integrated.
  4. Illustrations. The assignment should show use of examples and evidence. Appropriate examples should be fully and reliably integrated and evaluated.
  5. Conclusions. Should be analytical and clear, well grounded in theory and literature showing reflection upon key issues.


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