Zeeshan and Fayyaz were good friends same as Maria and Sara. Zeeshan and Maria were both investors in same capital market say Pakistan stock exchange. Fayyaz and Sara were directors of Arslan Bro. Corporation trading on the same stock exchange of which Zeeshan and Maria were investors. One share of Arslan Bro. Corporation is currently being traded at 109 PKR. Due to some recent incident, Zeeshan and Fayyaz broke their friendship and now hold feelings of envy for each other. In the meantime, Arslan Bro. Corporation was deciding to go into a project which was expected to generate huge profits in future and consequently high shareholder income. Sara leaked the news to Maria and she purchased the shares of Arslan Bro Corporation whereas because of recent fight with Fayyaz, Zeeshan remained worse in getting information. After a few months, the company took the project and earned huge profits. Market price of the share reached 670PKR within 3 months.

Part (1): What problem is prevailing in the market? (Name and explain the phenomenon)

Part (2): What would Sara be called in this case? Was she right in leaking the information to her close friend? Why or why not?

Part (3): Suggest some measures to counter the problem suggested by you in question 1.

Part (4): Irrespective of the case, do you think emotions play a role in investment decision of investors? Why or why not?

Part (5): Keeping above case in mind, do you think capital asset pricing model to be realistic? Provide justification for your answer.