You have recently joined a large American Fund Management company. Your boss has been
asked to present a lecture to a number of potential clients discussing efficient market
hypothesis (EMH) and behavioural finance (BF). She, however, graduated from the
University about 30 years ago. In confidence, she asked you as a recent graduate, to prepare
her a formal memorandum setting the ground for her presentation. In particular, in very
clearly separated sections, please:
1. Present the EMH concept and critically discuss its assumptions; – 30 marks
2. Discuss the assumptions and key concepts of BF – 30 marks
3. Please present the practical (in terms investment/asset allocation)
applications of both EMH and BF, including the work of Messrs Fama
and Shiller – 20 marks
4. Based on your analysis above, please debate whether the Nobel Prize
Committee saw common features in the work of these academics; – 20 marks
Your manager requires a fully referenced paper (using Harvard Referencing) so that she can
check the original ideas behind your views. She expects about 4,000 words (+/_10%) in this
memorandum – footnotes and appendices are NOT included in the word count. The manager
made a clear reference to company’s policy that Wikipedia is NOT an appropriate referencing
source and that bibliography for a paper of this type should contain at least 20 positions and a
good mix of textbooks, academic journals, economic press (The Economist, Financial Times,
Wall Street Journal, Forbes and similar) and quality internet-based sites (BBC, Bloomberg,

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