Module 5: Long Answer Questions

For students

Last updated: 17/08/2025 15:08

The questions are based on or inspired by the following references:

• Berk & DeMarzo, Corporate Finance, 5th ed. (2020)
  
• Brealey & Myers, Principles of Corporate Finance, 13th ed. (2020)

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💡 You can also press Ctrl + P (or Cmd + P on Mac) to print or save your responses as a .pdf file.

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⚠️ These exercises are powered by AI-assisted technologies and may contain occasional formatting or logic errors. Please report any issues you encounter so I can improve the experience.

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📘 Part 1 (until Midterm)

Module	Chapter	Slides	T/F	MCQ	Numeric	Long
5	ch13	🎞️	✅	❓	🔢	📝

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Answer the following questions based on the discussions in class.

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Q1.

Discuss the implications of the Efficient Market Hypothesis (EMH) for professional fund managers. Under which form(s) of market efficiency would active management be least valuable, and why?

Q2.

Explain the behavioral finance concept of overconfidence. How does overconfidence among investors affect trading volume, asset prices, and overall market efficiency?

Q3.

What is the momentum anomaly, and why does it pose a challenge to the predictions of the CAPM and EMH? Provide an example of how investors or fund managers might attempt to exploit momentum.

Q4.

Describe herding behavior in financial markets. What factors contribute to herding, and what potential consequences can it have for market stability and efficiency?

Q5.

Investor sentiment is often cited as a driver of bubbles and crashes. Discuss how psychological biases and sentiment can push asset prices away from fundamentals. Give one historical example.