1. Which of the following understanding on how to make money in the financial market is correct?

   1. One may be able to make money by taking certain risk in an efficient market.

   2. One may be able to make money by providing liquidity in an efficient market.

   3. One may be able to make money by having better information than the market and thus generate alpha in an efficient market.

   4. One may be able to make money by having better information than the market and thus generate alpha in an inefficient market.

   		1 only
   		1 and 2 only
   		1, 2, and 3 only
   		1, 2, and 4 only

2. Based on the size and value effects, what are the more likely views of an recession, which on average happens once every 10 year.

   I: The recession year is given a weight of 1/10 in evaluating the importance of the risk of each year, when market participants price assets

   II: Recession year might be more important than a normal year in investors' mind

   III: CAPM beta can already precisely capture the recession risk of individual stocks. So there is no need for singling out recession risk when evaluating asset value.

   IV: Recession risk can be at least partly captured by the size beta or value beta in the Fama-French three-factor model

   		I, II, III
   		II, III
   		II, III, IV
   		II, IV