1. Suppose you are an investment adviser at Luna Investment Co., Ltd., a local asset management company.

Your client, John, plans to purchase 30 percent of a firms Class A shares of outstanding stock. He believes that such a purchase will allow him to control the firm by electing his candidates to the board over time as current board members terms expire.

a)The firm has a cumulative voting process. To ensure he can gain the control he desires, what factors should he consider and why? (8 marks)

b) You find that the profit of XYZ Company has dropped by 10% compared to the previous month. However, its stock price is up by 0.5% after the announcement today. Is this an evidence against the efficient market hypothesis? Provide your reasons. (7 marks)

C) Suppose you collect monthly stock returns for all listed firms during the past 30 years. You regress the stock return in month on its lagged return in month and find a statistically significant regression coefficient of 0.3. What can you conclude on the market efficiency? Provide your reasons. Under this form of market efficiency, how would you analyze a company to identify useful trading signals? (10 marks)