Quick Finance Tip - Homogeneity of Expectations

Homogeneity of Expectations  assumes that all investors have the same economic expectation and thus have the same expectations of prices, cash flows, and other investment characteristics.

Informational Efficient Market reflects all information that is publicly available, is an unbiased estimate of all future discounted cash flows, and investors cannot expect to earn a return that is greater than the required rate of return for the asset.

A Market includes all risky assets or anything that has value (i.e. stocks, bonds, real estate, human capital) and not all assets are can be traded or can be invested. The market should contain as many assets as possible, however, it is not “practical” to include all assets in a single risky portfolio.