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Behavioral Finance - Research Paper Example
Author : jbarrows
Pages 8 (2008 words)
The efficient market hypothesis indicates that since market prices reflect all available information, containing information about the future, the only difference between the stock prices at time t and time t + 1 are phenomenon that can not possibly be predicted…
-The weak form hypothesis asserts that stock prices already reflect all information that can be derived by examining market trading data such as the history of past prices, trading volume, or short interest.
Numerous papers have demonstrated that early identification of new information can provide substantial profits. Insiders who trade on the basis of privileged information can therefore make excess returns, violating the strong form of the efficient market hypothesis. Even the earliest studies by Cowles (1933,1944), however, make it clear that investment professionals do not beat the market. It has already been stated that an efficient market is one where the prices of securities fully reflect all available information, but then what are the sufficient conditions for capital market efficiency In an idealized world, such conditions would be
The debate about market efficiency has resulted in thousands of empirical studies and literature attempting to determine whether particular markets are in fact 'efficient', and if so to what degree. In fact, the majority of studies and researches of technical theories have gone to the result that it is difficult to predict prices. ...