Page 111 - CAPE Financial Services Syllabus Macmillan_Neat
P. 111
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DO NOT WRITE IN THIS AREA DO NOT WRITE IN THIS AREA DO NOT WRITE IN THIS AREA (c) A portfolio manager convincingly shows that whenever the market value of a stock divided
by its book value is below 0.8, it is very likely that the stock price will go up. Whenever
the ratio is above 1.2, the stock price tends to fall.
Explain the validity of this statement relative to the efficient market hypothesis.
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[10 marks]
Total 19 marks
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