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Do you think UK stock market behaviour in 2009 was consistent with efficient market theory - Essay Example

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The currency of UK – Pounds is one of the strongest in the world. The economy of UK is based on the long history of trade and commerce that thrived in the country and between her colonies. In the…
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Do you think UK stock market behaviour in 2009 was consistent with efficient market theory
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Do you think UK stock market behaviour in 2009 was consistent with efficient market theory

The money available in the hand of the public was lesser than normal. The Government had to introduce a huge amount of money into the system to sustain the stability of the environment. (UK in for prolonged recession, 15th November, 2008).
The state of the UK economy can be attributed to some of the policies of the banks in the country. Like the USA, the UK banks were providing loans during the “house bubble”. When the bubble burst out the banks were in serious debt. The status of the borrowers was not analyzed properly and this caused the downfall in the economy. The age-old values of honesty and hard work have to be imbibed in the system to recover fully from the downturn and the system should introduce a system to minutely analyze the credentials of the borrowers before offering them the money. (UK economic conditions, n.d.) As the investments pouring in the company reduced their activities in the business front. The companies were looking to reduce their costs and hence the economic conditions worsened. The effect of these activities had an impact on the stock market of the UK. The paper deals with the effect on the stock market during recession and its confluence with the efficient market theory.
“The Efficient Market Theory” (EMT) is one of the most important theories that has risen in the context of the stock market. The main propaganda of the EMT is that information about the stock market is available to all. The information about various incidents enters the stock markets and is available to all. As a result, the stocks are influenced by the information and the price changes are related to it. Therefore, the investors cannot take undue advantage of the market and has to follow the similar trajectory of the other investors. Any form of fundamental and technical analysis does not help the situation of the investors. Therefore, no investor ... Read More
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