INVESTMENTS Two-Security Portfolio: Return rp =W+W2r2 W Proportion of funds in Security 1 W2 Proportion of funds in Security 2 =Expected return on Security 1
Types of market efficiency The weak-form of efficiency: price accurately reflect all information that can be derived by examining market trading data such as past prices, trading volume, short interest rate, etc
Effects of a Price Change What happens when a commodity's price decreases? Substitution effect(替代效应):the commodity is relatively cheaper, so consumers substitute it for now relatively more expensive other commodities