We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Efficient market hypothesis - Essay Example

Comments (0) Cite this document
Summary
All investors in the market therefore have all the information pertaining the securities and that no single investor is in a position to make…
Download full paperFile format: .doc, available for editing
Polish This Essay92.3% of users find it useful
Efficient market hypothesis
Read TextPreview

Extract of sample
"Efficient market hypothesis"

Download file to see previous pages For the case of semi-strong form, the prices of securities depend on the present and past information and not on the future expected information. Finally, the strong form contend that the prices of securities in the market reflect all the information i.e. past, present and future and that this information is in the domain of all the investors (Schwert 21). There is no opportunity to make abnormal returns in a strong market.
The strong market supports the efficient market hypothesis, as it is this form where investors are never in a position to make abnormal profits without incurring higher risk. The other two forms: weak and semi-strong form fails to support the EMH because not all investors are privy to all the information about the market and therefore some investors are in a position to make above average rate of return without taking above average risks (Schwert 23). I however believe that there is no efficient market. This is because the assumption in which the EMH is hinged are ideal i.e. that there are no transaction costs, that all investors have all past, present and future information and that the stock markets are efficient. These assumptions are idyllic and unattainable. Markets can therefore be in either the weak or semi- strong form in which case some investors have more information than others can. This can be shown from the many cases in which those in management positions have used insider information.
Economists and psychologists in the behavioral finance sector however argue that in the short run, efficient markets are unattainable. This is because the prices of securities are influenced by other psychological factors like those that the expectation in future prices. They further assert that security prices cannot be disseminated equally because of the bandwagon effect. Investors will therefore consider other factors in the ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Efficient market hypothesis Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
Efficient market hypothesis Essay Example | Topics and Well Written Essays - 500 words. Retrieved from https://studentshare.org/finance-accounting/1601516-efficient-market-hypothesis
(Efficient Market Hypothesis Essay Example | Topics and Well Written Essays - 500 Words)
Efficient Market Hypothesis Essay Example | Topics and Well Written Essays - 500 Words. https://studentshare.org/finance-accounting/1601516-efficient-market-hypothesis.
“Efficient Market Hypothesis Essay Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/finance-accounting/1601516-efficient-market-hypothesis.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Efficient Market Hypothesis

The author states that three types of efficient markets are based on certain assumptions and certain hypothesis. The weak-form efficient market hypothesis is based on assumption that current prices of stocks represent the full historical information. The technical analysis would not yield superior risk-related amounts of returns.

7 Pages(1750 words)Essay
Efficient Market Hypothesis
Efficient market hypothesis stipulates that the prices of stocks in the money markets represent summation of all probabilities of all future consequences. The information available in the public domain is assumed to reflect stock prices in the money markets.
6 Pages(1500 words)Essay
Efficient Market Hypothesis and Market Behaviour
Occasionally, due to the availability of certain information, investors will act as if directed in one way or another. The decision to act this way may end up being wrong or right for all investors. “When the price of a stock can be influenced by a “herd” on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally.
7 Pages(1750 words)Essay
EFFICIENT MARKET HYPOTHESIS
Hence, the EMH is of little relevance to corporate managers.’ Explain and discuss this contention. The efficient market hypothesis is a proposition which articulates that the market prices of security are a reflection of available information to the members of public.
4 Pages(1000 words)Essay
The Efficient Market Hypothesis
Basu illuminates that "in an Efficient Capital Market security prices fully reflect available information in a rapid and unbiased fashion" (1977, p663) This suggests that stock price, at a specific moment, reflects all the information that is available and the events that are announced.
6 Pages(1500 words)Essay
The Efficient Market Hypothesis
It states that the financial markets are usually efficient in terms of providing the right information to the investors. It also stipulates that the price of traded assets consists of information that is available for use. The example of traded assets involves; stocks, bonds and the properties.
14 Pages(3500 words)Essay
Efficient Market Hypothesis
Thus if any investor desires to earn higher returns he has to buy much riskier shares or bonds. Ordinary shares carry then least amount of risk and therefore the least amount of return. However investors are using technical analysis and fundamental analysis when they are taking their investment decisions to gain trade returns.
8 Pages(2000 words)Case Study
Efficient Market Hypothesis Essay
Indeed, there were several theories and models develop to further increase the understanding on financial markets. The knowledge, however, is subject to various criticisms and judgement. Such process allows the models and theories to be meticulously developed before being accepted.
20 Pages(5000 words)Essay
Corporate finance
The response was emanated from the different governments rather than from the market itself as many governments including US and UK governments injected money into the system to safeguard it from complete
8 Pages(2000 words)Essay
Study of Efficient Market Hypothesis 04012
is not possible to hit the market due to the reason that the efficiency of stock market causes existing stock prices to incorporate as well as reflect all the pertinent information (Malkiel, 2005). EMH does not entail that the prices of asset are always accurate. It does not
10 Pages(2500 words)Essay
Let us find you another Essay on topic Efficient market hypothesis for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us