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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

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 counter-argument 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?

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