FIN320- “CAPM” and “The Efficient Market Hypothesis”

Suppose
investors believe that the standard deviation of the market-index
portfolio has increased by 50%. Speculate on two potential implications of
CAPM regarding the effect of this change on the required rate of return
for a company’s investment projects.

From
the e-Activity, compare the returns of the two selected funds for the past 10
years. Determine whether you believe that the single-index CAPM should or
should not be rejected. Explain why or why not. (Go to Morningstar’s Website,
located at http://www.morningstar.com/Cover/Funds.aspx,
and select any mutual fund that follows the S&P 500 Index. Next, select any
actively managed fund of your choice that beats the S&P 500 Index portfolio

Create
an argument for the version of the efficient market hypothesis (i.e.,
weak, semi-strong, and strong) that you most strongly agree with. Provide
support for your position. Take a
position on the following statement: Highly variable stock prices suggest
that the market does not know how to price stocks. Support your answer
with examples.