What assumptions about market efficiency are typically adopted in capital markets research

PART A: GENERAL QUESTIONS QUESTION 1: What assumptions about market efficiency are typically adopted in capital markets research? What do we mean by ‘market efficiency’? QUESTION 2: If individuals have access to insider information and are able to make large gains on a securities market as a result of using information that is not widely known, then is this an indication that the market is inefficient? QUESTION 3: Refer to Accounting Headline 10.3 (in your textbook) and explain why investors might have reacted to the false rumour. Is the reaction of investors to this false rumour consistent with the view that the capital market is efficient or inefficient? QUESTION 4: Read Accounting Headline 10.9 (in your textbook) and then consider why we might expect, or not expect, the market to react to radio announcements made by Alan Jones. Would a market reaction imply anything about the efficiency of the capital market? PART B: QUESTION 5: Refer to the article “The role of social media in the capital market: Evidence from consumer product recalls” by Lee, Hutton & Shu (2015), and answer the questions that follow: a)According to the authors, how do firms use different forms of social media to manage the flow of information surrounding product recalls? b)What do the results of this study suggest about the effect of social media on capital markets? In your answer you should discuss how this relates to the efficient market hypothesis and how it ties into what you have learned in the Capital Markets Research module.