Market efficiency implies stock prices fully reflect all publicly available information instantaneously and, thus, no investment strategies can systematically earn abnormal returns. However, market efficiency per se is not testable. In order to analyze whether a stock market is efficient we have to test the joint hypothesis which refers fact that testing for market efficiency necessary involves asset pricing models. Then, we can compare real returns with expected returns predicted by a specific pricing model. In this context, the purpose of this study is to analyze whether the BOVESPA is an efficient market or, by contrast, it is possible to obtain abnormal returns employing the Capital Asset Pricing Model. To that end, we employ an intuitive trading rule based on purchasing exclusively those shares that are considered undervalued by the CAPM and compare it with the passive strategy of purchasing all shares that are members of the selective market index. Finally, our results are consistent with market efficiency as well as with the CAPM
