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Question 2 a)

Finance

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Question 2 a). Define the three forms of Market Efficiency. [6 marks] b). "Under the modern theory of Market Efficiency, in an efficient market, returns are predictable to some degree". Explain this view by comparing and contrasting it with the conventional theory of Market Efficiency. [15 marks) c). The Efficient Market Theory states that "if prices are right, there are no easy profit opportunities". Whilst, Behavioural Finance argues that the absence of profit opportunities does not necessarily imply that prices are right". Discuss the arguments underlying these statements. [14 marks]