Page 22 - CAPE Financial Services Syllabus Macmillan_Neat

UNIT 1
MODULE 2: PORTFOLIO MANAGEMENT AND INVESTMENT (cont’d)
SPECIFIC OBJECTIVES
Students should be able to:
9. identify reasons why different
investors select different portfolios
from the set of portfolios on the
efficient frontier;
10. evaluate the relationship between
risk and return as it relates to
security market line;
11. describe the three sub hypotheses
of efficient market hypothesis
(EMH) and their implications;
12. identify evidence in favour and
against the efficient market
hypothesis;
CXC A38/U2/16
CONTENT
Reasons:
(a) Security Market Line (SML).
(b) Efficient capital markets.
(c) Capital Market Line (CML).
Reasons why capital markets should be
efficient.
Factors which contribute to an efficient
market.
Sub hypotheses of the efficient market
hypothesis:
(a) strong;
(b) semi-strong; and,
(c) weak.
Their implications:
(a) past rates of return have no effect on
future rates;
(b) an investor cannot benefit over and
above the market by trading on new
information; and,
(c) no arbitrage opportunities exist.
Examples of evidence in favour of:
(a) availability of information to the
public;
(b) random-walk behaviour of stock
prices;
(c) performance of investment analysts
and mutual funds; and,
(d) technical analysis
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