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1) Describe the Theory of Efficient Markets. What is the primary notion of the Theory of...

1) Describe the Theory of Efficient Markets. What is the primary notion of the Theory of Efficient Market?
2) Explain why being a residual claimant makes stock ownership risky.
3) Do individual shareholders have an effective say in corporate governance matters?
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Answer #1

1) Efficient market theory states that a security's spot price reflects all the relevant and previous and historical known information about that asset. Moreover, the theory states that market prices efficiently reflect an asset’s underlying value, including the company’s cash, hard assets, intangible assets and liabilities.

The primary notion of the Theory of Efficient Market is that no investor can beat the market on risk-adjusted returns basis.

I can only answer 1 question at a time so I am solving question 1. Please do rate me and mention doubts in the comments section.

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