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 in finance. The first of them is why there is price change in the market for securities while the second considers how the change actually occurs. Investors involve themselves in identifying the securities that are expected to witness an increase in their value in the future. Moreover, they always try to identify those securities which will witness the maximum increase in their value. They are of the opinion that they have the capability to select only those securities that are expected to perform unexpectedly well in the market and drive the others out. In the process they use different forecasting techniques as well as some valuation methods. The combination of the techniques helps them in their decisions regarding investments. However the hypothesis states that the techniques are not effective and no one has the capability to predict the outperformance of the market. If the investors enjoy any advantage it is supposed not to exceed the incurred cost of transaction and research. Efficient market Hypothesis The theory suggests that it is extremely difficult to profit by predicting the movements in the prices. If in a market, the prices can adjust quickly without being biased to new information, such a market is called efficient markets. The availability of new information can lead to change in prices. The available information is reflected in the current prices of the securities taking a period under consideration. Adjustment in the price level takes place before an investor has sufficient time to trade and accrues profit from new information. Competition among the investors to accrue profit is one of the foremost reasons for the existence of efficient markets. Many are also involved in identifying the stocks that are mispriced. When more and more investment advisors or the market analysts spend time in taking the advantage from the stocks that are either lowly priced or highly priced, the probability of detecting the securities that are mispriced becomes smaller. In a situation characterized by equilibrium, only a small number of analysts will be able to gain from the mis-priced securities because of the chance factor. All investments performing in the market are priced fairly. But it does not imply that they will perform in similar fashion because of the effect of rise or fall in the price level. The capital market theory states that the return expected from a security is a function of the risk. As the nature of the new information is unpredictable, the changes in the prices are expected to be random and the prices of the stocks follow the random walk theory. There are three versions of the hypothesis namely the weak form, the semi-strong form and the strong form of hypothesis. The weak form of efficiency states that the information about the history of prices only are incorporated in the current prices and that is why nobody can detect the securities that are mis-priced and gain from the gain by analyzing the prices of the past. The semi strong form of the hypothesis states that the current price reflects all the information that is available publicly. The last form of hypothesis that is the strong form asserts that all types of information namely public and private are reflected in the current price. The aim of all investors is to accrue maximum gains. The newly generated techniques to predict the movements in price have not been as successful as expected. If the risks and the costs of transaction are taken into account
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…
This academic proposal is being carried out to discover and establish whether the UK stock market is really efficient and to identify the trends in the UK stock market. From having a glimpse at the capital market from all over the world, UK capital market is one of diversified exchange marketplace that have come under consideration from the evaluation in the research.
The purpose of this research is to study the effect of ex-dividend declaration on stocks listed in India. This will help in analysing the efficiency of the Indian Stock Market. In addition, it will also provide food for thought to the policy makers in order to increase the market efficiency and thereby capital inflows.
Different research studies have been conducted in order to identify and explore the relationship between the monetary policy and stock market. The central bank has always been under pressure to come up with appropriate monetary policy in order to regulate inflation and output gap in the economy.
The author of the paper states that for the purposes of economic statistics and econometric calculations a wide range of tools and theories are available. An area of considerable utility is the field of calculations pertaining to quantity or variants, at an arbitrary point within a particular series.
The complete dissemination of available information throughout the market reduces information distortions and allows market participants to decide their market actions under conditions of reduced risk of the unknown. Because of the need to come as close as possible to full and simultaneous availability of information to all market participants, it becomes necessary to measure how efficiently prices respond to the informational content of sudden and unexpected announcements, one of which pertains to dividends.
Since the introduction of the Capital Asset Pricing Model (CAPM), a series of different efforts have been demonstrated towards evaluating the validity of the model.
These evaluation and analyses have been a unique breakthrough and a significant contribution to the finance economics globally (Vialar, 2009; Pg.
The CAPM was built on the model of choice of portfolio developed by Harry Markowitz (1959). According to the model of Markowitz, an investor opts to select a portfolio at time t-1 which would generate a stochastic return at time t. The model assumes that investors are generally risk averse, and at the time of choosing their portfolio they are concerned only about the mean and variance of their return at the end of the period of investment.
To illustrate how a stock market operates and spreads the wealth in one country, let us say Company-A has been so successful in its manufacturing operations that all its goods sell as fast they are produced. The firm knows that it could sell even more products if it could get enough money to build another factory.
The author states that financial market reforms were central to China’s commitment to the World Trade Organization, in which China became a member in 2001. Following China’s WTO membership, international investors gained easier access to the financial market. The Chinese government is trying to change the function of the two existing stock exchanges.
This study needs to address the hypothesis testing whether SET50 and SET100 Indexes follow the random walk or not. Level of the efficiency of Thailand stock exchange market is also determined for a period of four years. It also aims to investigate the impacts of external as well as internal factors on SET50 and SET100 Indexes.
62 pages (15500 words)Dissertation
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