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Appling the EMH evaluate the role that government played in economic recovery using recent real-life examples - Essay Example
Author : weissnatanderso
Finance & Accounting
Pages 12 (3012 words)
The prices of financial assets are often influenced by the intervention from the part of the government as the economic situation of a state is often under the policies parameters of the government. The decision making of the investors revolve around the information pertaining in the market…
Aim and objectives of the study
The theme around which the discussion will tend to revolve is of efficient market hypothesis under the intervention of the government. The hit of the financial crisis has left many countries under the scanner and so the usefulness of the study cannot be underestimated. Enormous scope of the study is waiting in the background as it is extremely important to understand or analyze the intervention of the government in detailed manner in this volatile scenario. The study will take into consideration or will try to consider the various policies of the government which will determine the scope of legislation on efficiencies of the market in the near future. The present times has witnessed gradual instability in the market due to the imposition of the different market policies of the government and would provide an opportunity of learning in the current scenario.
Efficient market hypothesis
The efficient market hypothesis implies that if any new form of information is available in the market the share price of the company will move accordingly and the movement of the price will be rational according to the information available in the market. In this type of market no trader will have an opportunity to earn profits which is above the normal level on the return from a share greater than the fair return from the associated risk. The chance of absence of normal profits arises as the past or the future information is reflected in the current prices of the shares. The availability of new information in the market has the ability to affect the prices of the shares (Palan, 2007, p. 3).
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