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a. Briefly compare the three forms of Efficient Market Hypothesis (EMH). You observe that the asset price has reflected rational expectation, briefly explain what is
a. Briefly compare the three forms of Efficient Market Hypothesis (EMH). You observe that the asset price has reflected rational expectation, briefly explain what is the meaning of rational expectation and then discuss, based on your observation, which form this market belongs to?
(30 marks)
b. Assume that investors form rational expectations, how does monetary policy influence stock prices? [Hint: transmission mechanism]
(20 marks)
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