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Problem 4 Consider the efficient market hypothesis framework. Assume that dividends evolve according to a Random Walk process (without drift) and that deviations from

Problem 4 Consider the efficient market hypothesis framework. Assume that dividends evolve according to a Random Walk process (without drift) and that deviations from the efficient market hypothesis are stationary. That is to say: Are stock prices cointegrated? If so, find the (normalized) cointegration vector.

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