When there are no taxes and capital markets function well, it makes no difference whether the firm borrows or individual shareholders borrow. Therefore, the market value of a company does not depend on its capital structure
SInvestment Decision vs. Financing Decision OMarket Efficiency →Weak form efficiency →Semi -strong- form efficiency >Strong form efficiency OLessons of Market Efficiency Irwvin/McGraw-Hill
Market Portfolio-Portfolio of all assets in the economy. In practice a broad stock marke index, such as the S&P Composite, is used to represent the market. Beta- Sensitivity of a stock's return to the return on the market portfolio