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Based on recent events, discuss whether the stock markets are efficient according to the EMH. - Essay Example
Author : daxmacejkovic
Finance & Accounting
Pages 4 (1004 words)
Title Name: Course: Professor: Institution: City and State: Date: Introduction The stock market is a great contributor to the economy of a nation. This is because it gives investors a chance to input their finances and capital into the cash flow of a nation…
The investors will gain through selling their shares at a higher price than they bought them, thereby making a profit. In addition, they benefit from dividends realized by the company, though the value of dividend earned will depend on the number of shares that a person has. It’s not always that the investors benefit, they might experience losses when the share prices decrease. Shares are traded through share exchanges, which take the form of Over The Counter (OTC) or through listed exchanges.2 Efficient Market Hypothesis Companies, for a long time have been taking advantage of Efficient Market Hypothesis, which was developed in the early 1960’s by Professor Eugene Fama. This is a theory that shows how impossible it is for a person or a company to beat the market. It shows that when making selling or purchasing decisions, the value of available information is indispensable.3 It states the importance in three forms, the weak form, semi-strong form and the strong form. In the weak form, it’s said that the history of a company can be shown by the past prices. Some academicians however dispute this and say that the past outcomes of a company can never dictate the future. ...