Differences between the pricing equations

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a) Briefly discuss similarities and differences between the pricing equations of the i) intertemporal capital asset pricing model (ICAPM) and ii) arbitragy pricing theory (APT).

b) Briefly explain how Akerlof's (1970) "lemons problem" predicts that the initial public offerings (IPO) market for good companies can fail without access to certification.

c) It has been observed that most investors show certain behavioral biases - for example, investors tend to exptrapolate historical growth too far in the future. Briefly explain why these behaviroal biases (in general, not confined to the example listed above) do not necessarily mean that market prices are biased, too.

Reference no: EM132641612

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