a) Suppose an investor considers two companies, namely A and B from the Johannesburg Stock Exchange (JSE). Over the last decade, Company A has yielded an average investment return that is double that of Company B. Considering the efficient market hypothesis (EMH), discuss whether this scenario contradicts the concept. (3)

b) John, a second-year student at the NWU Business School, has recently completed lectures on investment management in his Financial Management module. He borrowed R500,000 from the bank and invested it in a portfolio of equities listed on the JSE. He holds the belief that active management of his investment is crucial to avoid significant losses. Evaluate the validity of John's belief according to the EMH and state whether it is justifiable. (3)

c) In terms of the EMH, assuming a market is strong-form efficient, explain whether there are any potential advantages to insider trading. Please explain your view on whether insider information is accounted for in a strong-form efficient market. (4)

d) The national lottery in South Africa is conducted weekly. The system allows the purchaser of a ticket to select six different numbers from 1 to 50. If the chosen six numbers are then randomly drawn on live television, the ticket holder wins a share of a large cash sum equivalent to the total ticket sales. Discuss whether the South African market for lottery tickets exhibits weak-form efficiency; and state whether it also exhibits semi -strong and strong form efficiency. (4)

e) Last summer, during an MBA study school at the North-West University, four students decided to form an investment club. They each proposed different equity investment strategies, namely:

• George proposed investing in South32 Ltd, expecting a turnaround due to its poor performance in the last two years.
• Grace recommended investing in Sibanye Gold Ltd, based on a rumour about a successful new head of marketing appointment.
• Tshepo advocated for random share selection, recommending FNB Ltd.
• Peter recommends buying shares in Dischem ltd. His brother works for Discovery health ltd, and he has insider information that Dischem ltds shares will rise sharply soon when Discovery health ltd announces the appointment of Dischem ltd as its pharmacy of choice.

For each student, describe how their proposed share selection strategy would perform in markets that are strongly efficient, semi-strongly efficient, weakly efficient, and inefficient. Your answer should be set out in a tabular format as follows:

	EMH Strongly efficient	EMH Semi-strongly Efficient	EMH Weak Efficiency	EMH - Inefficient
George
Grace
Tshepo
Peter

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