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b). During the meeting, Mike proposes that they should also allocate investments to BRIGHTON. He argues the fund manager of BRIGHTON is able to generate superior profits in the future, which is evidenced by the regression output in the table that BRIGHTON generated strong positive alphas relative to the benchmark during the past five years. He also adds that the large alpha generated by BRIGHTON is a clear indication of market inefficiency. However, Jennifer disagrees on Mike's proposal and arguments. Based on her knowledge of mutual fund performances and market efficiency, Jennifer believes Mike's arguments have several flaws and there are caveats in the regression analysis performed by Mike. Provide two valid reasons to explain why we should refute Mike's proposal and arguments. (Your answer should be no longer than 200 words) (4 marks) c). During the meeting, Harry showed strong interests in BRIGHTON and requested Mike to design an arbitrage strategy, which could profit from the positive alpha of BRIGHTON. The strategy should only involve BRIGHTON, the market portfolio (Mkt), and the risk-free asset (RF). Describe how to set up the strategy. What is the weight on the risk-free asset in the strategy? (3 marks) d). During the meeting, Harry told Mike that he identified another good-performing fund NEURIZON. The fund adopts a long-term investment strategy by investing in stocks of which the prior 5-year cumulative returns were among the bottom 20% of all stocks in the market. That is, NEURIZON buys these fallen angels, which had a prior 5-year underperformance, and holds them for about 3 years before rebalancing. It turns out that NEURIZON's investment strategy works well for its fund investors. Not only for NEURIZON, other funds adopting NEURIZON's investment strategy also performs well for their investors. On average, these NEURIZON-type funds have earned superior cumulative abnormal returns over and above the CAPM for decades. Please interpret whether the superior performance of NEURIZON's investment strategy is a violation of the Efficient Market Hypothesis or not. (Your answer should be no longer than 150 words)

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