Essay: Study on Efficient Market Hypothesis

Finance & Accounting
Pages 10 (2510 words)
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Efficient Market Hypothesis Table of Contents Abstract 3 Introduction 3 Literature review 4 Random walk hypothesis 4 Fair game model 5 Efficient market hypothesis 7 Analysis 7 Three forms of market efficiency 7 Market efficiency as a fundamental issue 8 Implications of weak or semi-strong market efficiency 9 EMH on behaviour finance perspective 10 Conclusion 11 Bibliography 12 Abstract This study deals with one of the most important areas of behavioural finance, the efficient market hypothesis.


Different forms of efficient hypothesis, i.e. weak, semi-strong and strong, will be critically analyzed to identify why different forms of market efficiency lead to major issue in fundamental analysis of companies. Implications of weak or semi strong market efficiency will be discussed with evidence. Lastly, arguments on efficient market efficiency will be addressed on behaviour finance perspective. Introduction Efficiency in market means that there is absence of any systematic way to beat the market. The efficient market hypothesis states that the information about the value of the firm is fully reflected in the current stock prices. It also states that the firm will not be able to earn to excess profits i.e. profits over and above the profits made by the other players in the market by using this information. The hypothesis deals with two of the fundamental questions of finance behaviour. The first of them is why there is price change in the market for securities while the second considers how the change actually occurs. ...
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