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Investment Advice - Essay Example

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Investment Advice

The share prices of the stocks which are being traded in the market, are decided by incorporating and reflecting all associated information (Quiry, Dallochio, & Vernimmen, 2011). The supporters of the Efficient Market Hypothesis are of the idea that the stocks or shares are always traded at their fair value, which in turn makes it almost impossible for the investors to manipulate the overall stock market by either indulging in the purchase of low priced stocks or selling the high priced stocks. According to this theory, it is not possible for the investors to manipulate or outperform the stock market as the market is efficient in terms of incorporating all relevant information.Efficient market hypothesis is believed to be applicable in the real stock markets by some of the analysts. Many of the financial analysts and economists are of the view that the stock markets are always efficient in terms of reflecting the complete information associated with the different stocks and the overall stock market. This school of thought is of the view that it is possible for the stock market to be efficient, as any new information in the market is passed on very rapidly and hence this information is incorporated in the prices of the stocks. This makes it impossible for the investors and financial analysts to take advantage through the techniques of technical analysis or fundamental analysis. This concept of efficient market hypothesis is directly related with the concept behind the ‘random walk’....
EFFICIENT MARKET HYPOTHESIS Efficient market hypothesis is one of the famous financial or investment theories, which tries to explain the general behaviour and trend in the stock market. According to this theory, it is not possible for any investor, either big or large, to beat the market because the stock market is efficient. The share prices of the stocks which are being traded in the market, are decided by incorporating and reflecting all associated information (Quiry, Dallochio, & Vernimmen, 2011). The supporters of the Efficient Market Hypothesis are of the idea that the stocks or shares are always traded at their fair value, which in turn makes it almost impossible for the investors to manipulate the overall stock market by either indulging in the purchase of low priced stocks or selling the high priced stocks. According to this theory, it is not possible for the investors to manipulate or outperform the stock market as the market is efficient in terms of incorporating all relevant information. Efficient market hypothesis is believed to be applicable in the real stock markets by some of the analysts. Many of the financial analysts and economists are of the view that the stock markets are always efficient in terms of reflecting the complete information associated with the different stocks and the overall stock market. This school of thought is of the view that it is possible for the stock market to be efficient, as any new information in the market is passed on very rapidly and hence this information is incorporated in the prices of the stocks. This makes it impossible for the investors and financial analysts to take advantage through the techniques of technical analysis or fundamental analysis. This concept ...Show more

Summary

The aim of the paper “Investment Advice” is to analyze the main objective of making any kind of investment and understand why investors invest in stocks, projects, and different types of securities. One of the most famous theories in this regard is of Efficient Market Hypothesis.

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