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  A rational investor makes investment decisions based on maximization of his/her expected utility or wealth.  

One type of risk not covered by the CAPM is estimation risk.  

An efficient market is one where the prices of securities traded on the market at all times “fully reflect” all information, whether public or private.  

The CAPM model is used to determine the expected return of a security or stock, based on the riskiness (or beta) of the security relative to the market portfolio.  

CAPM stands for Capital Asset Proportionate Model.  

Management discussion and analysis (MD&A) in a company’s 10-K filing is a required disclosure by the SEC.  

Accounting information potentially reduces moral hazard based information asymmetry because accounting numbers can be used in compensation contracts and serves to monitor managements’ behavior.  

Market efficiency implies that it is the form of the disclosure and not the information content that is important to investors.  

An efficient market is one where the prices of securities traded on the market at all times “fully reflect” all information, whether public or private.  

Accounting information potentially reduces moral hazard based information asymmetry because accounting numbers can be used in compensation contracts and serves to monitor managements’ behavior.