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Answer the following questions, fully justifying your answers: a) List (without discussing in detail) two puzzles in aggregate asset prices that can be explained if

Answer the following questions, fully justifying your answers:

a) List (without discussing in detail) two puzzles in aggregate asset prices that can be explained if investors have Prospect Theory preferences. In each case, which features of Prospect Theory are the key ingredients in explaining the puzzle?

b) What is the value effect? What form of the efficient markets hypothesis does this violate? What are some caveats?

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