Discuss:Miller and Scholes (1972) model of corporate dividend policy that assumed market efficiencyJensen and Benington (1973) challenge on efficient market hypothesisFama and French (1992) proposed three factor model

The Miller and Scholes model of corporate dividend policy, first proposed in 1972, is a theoretical…

Answered: Discuss: Miller and Scholes (1972)…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 4Q

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Miller and Scholes (1972) model of corporate dividend policy that assumed market efficiency
Jensen and Benington (1973) challenge on efficient market hypothesis
Fama and French (1992) proposed three factor model

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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