10. The graph below shows five-year average annual returns of ten portfolios sorted by market-to-book ratios. Portfolios are rebalanced yearly. 20 } 1R 17.39 17.04 26.50 16 15.84 14 12.98 12.54 12 11.68 10 3.62 8 2 Deciles High MB (growth stocka) 10 Low M/D (value stocks) Source: Lakonishok, J., A. Shleifer and R. Vishny, 1994, Contrarian investment, extrapolation and risk, Journal of Finance 49, 1541-1578 Data period: January 1963-April 1990 a. Which form of market efficiency is the graph about? b. Does the graph provide evidence support or against market efficiency? Justify your answer. C. Regardless of your answer in b., provide two arguments that stock markets might still be efficient even though the evidence shown in the graph exists. 10. The graph below shows five-year average annual returns of ten portfolios sorted by market-to-book ratios. Portfolios are rebalanced yearly. 20 } 1R 17.39 17.04 26.50 16 15.84 14 12.98 12.54 12 11.68 10 3.62 8 2 Deciles High MB (growth stocka) 10 Low M/D (value stocks) Source: Lakonishok, J., A. Shleifer and R. Vishny, 1994, Contrarian investment, extrapolation and risk, Journal of Finance 49, 1541-1578 Data period: January 1963-April 1990 a. Which form of market efficiency is the graph about? b. Does the graph provide evidence support or against market efficiency? Justify your answer. C. Regardless of your answer in b., provide two arguments that stock markets might still be efficient even though the evidence shown in the graph exists