StudentShare solutions
Triangle menu

Corporate finance - Essay Example

Nobody downloaded yet

Extract of sample
Corporate finance

Market efficiency is a crucial factor in deciding the investment strategies of an investor. If the securities market is efficient, the best estimate and returns will be reflected in the price of the shares and there will be no undervalued securities that would offer higher return than expected. However, opposite could be the case in the weak efficient markets. (WOOD, DASGUPTA & POSHAKWALE, 1995) THREE FORMS OF MARKET EFFICIENCY BY FAMA (1970): In this aspect the most contributing work was presented by Fama in 1970. He formulated a market efficiency hypothesis (EMH) which discussed the three types of market efficiency that can prevail in a capital market depending on the available information in the market. These three forms of market efficiency are (1) Weak form efficiency (2) Semi-strong form efficiency (3) Strong from efficiency. 1. Weak Form Efficiency: The weak form of market efficiency hypothesis asserts that the current stock price reflects all the information related to historical prices or past price movements only. This information includes trading volume, rate of return and market generated information etc. This form of market efficiency assumes that the current stock prices reflect all the past information and no one can earn huge profits by knowing information which is known to everyone in the market. This implies that the future rate of return can’t be predicted by using past rate of return and can’t provide with huge abnormal returns. In order to predict the movement of prices based on the past information a technique called technical analysis is sued widely. (BHOLE. 1982; CLARKE, JANDIK & MANDELKER, 2001) 2. Semi-Strong Form Efficiency: The semi-strong form of market efficiency hypothesis explains that the current stock price reflects all the publicly available information along with the historical information. The available public information includes: stock earnings and prices, declared dividends information, political, economy and company related news, dividend yield ratio, price earning ratios, announce merger plans, available information in company’s financial statements, financial situation of competitors and stock splits etc. The assertion behind this form of market efficiency is the same that no one can earn huge profits by knowing information which is known to everyone in the market that is the information is public. In this way the public information is already absorbed into market prices and the investors can’t yield above average profits in such investments and markets. (BHOLE, 1982; CLARKE, JANDIK & MANDELKER, 2001) 3. Strong form Efficiency: The strong form of market efficiency hypothesis explains that the currents stock price reflects all the available information including public and private information both. It encompasses both the weak and semi-strong form of markets. In this hypothesis the emphasis is on insider dealings. It implies that, when both public and private information is reflected in stock price, the directors or the bunch of individuals in the company who have more knowledge of the company will not be able to benefit from the above average profits. The difference between semi-strong and strong efficiency is that in a strong efficiency market nobody will benefit from the information that ...Show more
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Corporate finance Essay Example | Topics and Well Written Essays - 1500 words - 2”, n.d.)
Retrieved from https://studentshare.net/finance-accounting/76592-corporate-finance
(Corporate Finance Essay Example | Topics and Well Written Essays - 1500 Words - 2)
https://studentshare.net/finance-accounting/76592-corporate-finance.
“Corporate Finance Essay Example | Topics and Well Written Essays - 1500 Words - 2”, n.d. https://studentshare.net/finance-accounting/76592-corporate-finance.
  • Cited: 0 times

Summary

Corporate Finance Corporate Finance INTRODUCTION: To understand capital markets and its functions it is important to delve into the concept of stock market efficiency. This concept deals with the movement in share price in the stock market and the factors affecting the movement…
Corporate finance
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Corporate finance"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Corporate finance
.....Financial Times Advanced Corporate Finance Assignment Name Surname Educational Institution Introduction It was estimated that 55,000 acquisitions valued at $1.3 trillion were materialised in the 1980s. Due to globalisation, the merger and acquisition activities reached $3.44 trillion in 2010.
6 pages (1500 words) Essay
Corporate finance
Share price refers to the price of a single share that company issues for subscription. While taking decision on share subscription, an investor compares the share price with company’s financial statements.
6 pages (1500 words) Essay
CORPORATE FINANCE
However empirical evidence remains inconclusive. In financial theory, disagreement exists with respect to the effect of capital structure on firm value. The traditional view of corporate capital structure and valuation holds that there is an optimal capital structure and thus the total value of the firm can be increased through a judicious financing mix.
6 pages (1500 words) Essay
Corporate finance
The other notion that dividend decisions also affect the value of a listed company proceeds from thinking along similar lines. Unfortunately (or fortunately, depending on how one looks at it),
18 pages (4500 words) Essay
Corporate Finance
each gearing level; to determine the EPS for each level of gearing under a bad year or good year; to construct a graph where EBIT and EPS are the axes and , using the EBIT-EPS data that will be developed, plot the data on the graph and discuss the possible ranges where lower
10 pages (2500 words) Essay
Corporate Finance
The world is truly becoming more of a global village every day. We cannot be separated from what is happening all across the world, as recent events unfold right across our TV screens 24/7 courtesy of satellite TV and the plethora of channels that work
1 pages (250 words) Essay
Corporate finance
ort for the finance minister about development of standard corporate reporting regulations in the country and importance of standard corporate governance regulations as an important part of corporate reports published by the public companies. Therefore, this report will deal
8 pages (2000 words) Essay
Corporate finance
The depreciation for the following years is calculated in the same way until year 8 when depreciation assumes straight linear method. In this case, the final salvage after 12 years is insignificant and in this calculation it is
3 pages (750 words) Essay
Corporate Finance
It is a multinational corporation, based in United Kingdom (UK) and it is listed on London Stock Exchange (LSE) (Rexam Plc, 2014c). GSK is regarded as the world’s sixth largest pharmaceutical company, which is based in Brentford, London. The company
7 pages (1750 words) Essay
Corporate finance
Instead of this, the market worth of the company depends on its operating profits. Company’s capital structure is the means by which a company funds its assets. It can finance or fund its operations either
8 pages (2000 words) Essay
Comments (0)
Click to create a comment
Let us find you another Essay on topic Corporate finance for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us