Corporate financial management - Essay Example

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Corporate financial management

Also the investments were done assuming that the available market information on the housing markets are correct. The banks granted loans assuming that markets were efficient while overlooking the underlying risk. This led to increase in the number of defaulters that eventually resulted in the financial crisis and the global economic meltdown of 2007-2012. Evaluation of argument: financial crisis means redundancy of the efficient market theory as an explanation of financial decisions The financial crisis of 2007-2012 highlighted the redundancy of efficient market theory as an explanation of the financial decisions. This statement has been evaluated with the help of the following course of events that took place in the economy of US and in the global economic scenario. The investments in the mortgage market in US were very lucrative as it offered high returns in short interval of time. More and more numbers of people considered the investments in US mortgage market as an instrument of short term gains. ...Show more

Summary

Corporate financial management Contents Contents 2 Introduction: financial crisis 2007-2012 and criticism of the efficient markets theory 3 Evaluation of argument: financial crisis means redundancy of the efficient market theory as an explanation of financial decisions 3 Financial theories and models 4 Efficient Market Hypothesis 4 Random Walk Hypothesis 5 Conclusion 5 References 7 Introduction: financial crisis 2007-2012 and criticism of the efficient markets theory The financial crisis of 2007-2012 has led to severe criticism of the Efficient Market Hypothesis Theory…
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