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Question 3 Based on your knowledge of econometrics and finance, please answer the following ques- tions. a) How would you test for market efficiency? Does
Question 3 Based on your knowledge of econometrics and finance, please answer the following ques- tions. a) How would you test for market efficiency? Does the efficient market hypothesis typically hold? When appropriate, use equations to justify your answer. b) What is the difference between deterministic and stochastic trends in time series analysis? Justify your answer. c) How would you test whether value risk is priced in equity markets? How would you test for the validity of the Fama-French three-factor model? Outline a few approaches that you deem sensible
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