Got a tricky question? Receive an answer from students like you! Try us!

A market is efficient with respect to a particular set of information if it is impossible to make abnormal profits - Essay Example

Only on StudentShare
Finance & Accounting
Pages 6 (1506 words)


Behaviors of Stock Markets Date: Behaviors of Stock Markets Outline Introduction Market Behaviors Market Inefficiency Weak form efficiency Semi Strong form efficiency Strong form efficiency Practical researches on Capital markets Market Conclusions and practical situations Conclusion Bibliography Introduction The first part of this assignment is based on the efficiency of stock markets…

Extract of sample
A market is efficient with respect to a particular set of information if it is impossible to make abnormal profits

Second part of the essay contains on a market conclusion about the practical behaviors of stock markets in relation with stock movements. This debate also include the information of the market behavior that in which circumstances an investor can make abnormal profits and in which conditions it is not possible to make abnormal gains and profits. It this part, debate is also made on the question that either market is efficient or not. The last part of this assignment is based on a general conclusion about this study. Topic: A market is efficient with respect to a particular set of information if it is impossible to make abnormal profits by using this set of information to formulate buying and selling decisions. The efficiency of the stock market is based on the efficient market hypothesis. Many investors believe that they can select stock with the help of their forecasting and valuation techniques and can make abnormal profits easily. On the other side the efficiency market hypothesis states that all the stock prices are based on all the accurate information and reflect the full and fair information. ...
Download paper
Not exactly what you need?

Related Essays

Efficient Market Hypothesis: Is the Stock Market Efficient?
Pesendorfer, 2006; Lim and Tan, 2003; Lo and Mackinlay, 1999), EMH remains one of the major building blocks of modern finance. This theory asserts that the financial markets are "informationally efficient", which means the current prices of assets (i.e., stock, bonds) reflect all the available information. The EMH view of the market is that, when information arises, it spreads very quickly and changes the prices of assets appropriately without delay. Since the information or news is by definition unpredictable, the resulting price changes must be unpredictable. This is called the "random walk"…
7 pages (1757 words)
Stock Market Efficiency
The intention of this study is the capital market that provides a conducive and convenient venue for the investors that can be either organizations or individual entities to buy and sell shares and bonds in the form of stock exchange on a local and worldwide basis. Due to the advancement in technologies, the world has become a place where human being can travel and reach any destination within no time. Therefore, this has also provided an opportunity for the overseas institutions to participate in the trading activities of the stock exchange based in the vicinity. However, with reference to…
33 pages (8283 words)
Essay: Study on 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…
10 pages (2510 words)
Efficient Market Hypothesis
The efficient market theory assumes that there are no transaction costs, money market is not segmented and it is easy to enter the money markets. Efficient market hypothesis is explained in three ways. First, there is weak form efficiency. Weak form efficiency stipulates that all past information that is available in public domain is a reflection of stock prices. The prices are considered unbiased and best estimation of security value. It presumes that it is impossible to predict future prices using past information through technical analysis (Pompian, 2006). Therefore, an investor cannot use…
6 pages (1506 words)
Efficient Market Hypothersis
While the extent of the validity of these criticisms remains debated, the efficient-market hypothesis (EMH) has held a pronounced influence on political and academic thought. This essay considers the extent that the market, as Warren Buffet claims, functions under irrational processes, or can be explained in rational terms through the efficient market hypothesis. Outline of the Efficient Market Hypothesis (EMH) In its modern incarnation Professor Eugene Fama first articulated the efficient-market hypothesis in the early 1960s during his time at the University of Chicago Booth School of…
8 pages (2008 words)
Efficient Market Hypothesis
Among the foremost to apply digital computers to perform empirical research in the field of finance, Fama operationally defined the EMH by pointing structure on several information sets accessible to market players. The efficient-market hypothesis necessitates that the agents should expect rationally that on average the overall population is correct (although if no individual is) and each time new pertinent information comes out, the agents should update their anticipations appropriately. Moreover, agents are not needed to be rational. EMH permits that on facing novel information, some…
4 pages (1004 words)
Corporate performance, abnormal profits and sectoral differences
Whereas some people consider the quantity of firms assets as an indicator of its performance, economists use different approaches such the efficiency in which firm or industry utilize its resources to generate income. Firms operating in the same industry exhibit dissimilar performance while even firms operating under different industries have depicted similar performance trends (Rumelt, 1991, p.179). Therefore, it is not clear as to what exactly determines performance of the firms since some people thinks that directors of the company and the environmental conditions play a significant role in…
4 pages (1004 words)