You are working as an investment adviser for a client who is planning to invest in a country named Costaguana. Shortdated government bonds in Costaguana offer a return of The average return on the stock market in Costaguana is The variance of this average stock market return is You are required to look at five Costaguanian companies as follows:

The expected return for company A is

The expected return for company B is

The expected return for company C is

The expected return for company D is

The expected return for company E is

Your client is also enthusiastic about investing in the Costaguana market because it has fallen sharply over the last ten years and she believes that it is likely to rise in the future as a result of this. Explain why efficient market theorists would not agree with this kind of argument. Are there any results arising from recent developments in behavioural finance which might present a counterargument to the efficient markets viewpoint? If she does decide to enter the Costaguana market despite the risk that it might fall further are there any measures that she could take to manage the risk involved in such an investment?

to investing in the market in Costaguana as a whole not just to the specific