Page 35 - FINAL CFA SLIDES DECEMBER 2018 DAY 13
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LOS 46.b: Distinguish between market
        value and intrinsic value, p.238                          Session Unit 13:
                                                                  46. Market Efficiency



        The market value of an asset is its current price. The intrinsic value or fundamental value of an

        asset is the value that a rational investor with full knowledge about the asset’s characteristics would
        willingly pay. E.g, a bond investor would fully know and understand a bond’s coupon, maturity,
        default risk, liquidity, and other characteristics and would use these to estimate its intrinsic value.



        LOS 46.c: Explain factors that affect a market’s efficiency, p.238


       •    Number of market participants.

       •    Availability of information.                 tanties
       •    Impediments to trading re Arbitrage.

       •    Transaction and information costs.



        LOS 46.d: Contrast weak-form, semi-strong-form, and strong-form market efficiency., p.239

        •   Weak-form efficient market hypothesis (WEMH): current security prices fully reflect all currently
            available security market data. Thus, past price and volume (market) information will have no

            predictive power about the future direction of security prices because price changes will be
            independent from one period to the next. You cannot achieve + risk-adjusted returns on average
            by using technical analysis.
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