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ECON 435

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Corporate finance lecture notes

9/23/2005

9/26/2005

10/7/2005


10/10/2005


10/21/2005

I was absent this day...

  • Big point:
    • Quantification of risk and return is a crucial aspet of finance. Value maximizing decisions require an understanding of risk & return.


Capital Market Efficiency


10/24/2005

ECON 435: Capital market efficiency Efficient market hypothesis Actual capital markets are actually efficient. Therefore all transactions involving security markets are zero NPV transactions.

  • Two situations where transaction is not non-zero NPV:
    • You have information the market doesn't have
      • By doing reserach
      • By being an insider
    • You engage in a non-rational transaction


  • Three forms of market efficiency
    • Strong form efficiency
      • Security prices already reflect all information that exists, no insider trading!
    • Sem-strong form efficiency
      • Prices refelct all public information.
    • Weak-form efficiency
      • The prices at least refect past prices. Therefore, statistics have no value.


11/10/2005

Took notes on ppt slides 13 & 15

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