Essay on Accounting Theory

The Efficient-Market Hypothesis (EMH) states that it is impossible to beat the market because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information.

After a profit announcement was made by David Jones Ltd, it is the objective of this report to note whether there was an impact of such information on investor behaviour via the share prices of this company. To ensure that the information found was accurate, the effect of the All Ordinaries was taken into consideration and comparisons were made between David Jones and its two main competitors. After analysing the closing share prices before and after the date of the announcement, it was found that share prices reduced more than that of the general stock market and also more than that of its main competitors. This report concludes that the announcement of accounting information by

The weekly performance of IBM stock presented a contestant growth. One highlight of the falling of stock price in the 6th week in the investment period was when IBM presented the 3rd quarter financial report. The investors weren’t satisfied with the profit report which they expected to be better especially when other IT companies were doing well in the 3rd quarter. One mistake I made was that I didn’t follow closely to the financial report of the company; therefore, I missed the peak of the stock price. From this experience, I learned that financial reports and current news are important indicators of the stock price. By following closely to the current event and analyzing the financial report, investors can maximize the profit and also become more familiar to the market.

to the company itself, rather than the stock’s price movement or the overall state of the market.

This report will examine the impact of the Qantas profit announcement had on the share price. This will determine if the announcement had an impact or if it was market forces on investors with predetermined outcomes for their share price. The fluctuations seen in the Qantas share price over the three weeks before and three weeks after the announcement date of 28th of Augusts 2014 will be analysed within this

According the definition of EMH, the price which shown on the stock market already were the best results that shows the company’s operating ability. Therefore, it does not matter how much effort made by the stock firm and investor, and how cautious they are. Information already reacted in the stock prices, whether it is an expensive stock or a cheaper one. It seems that how much information could be reflected in price might the distinction of different form of market efficiency. Roberts (1967) had clearly defined the difference between the weak form, semi-strong form, and strong, and it further summarised by Fama (1970) to define the information efficiency, which is: “A market in which prices always ‘fully reflect’ available information is called ‘efficient’”. In the fact that several form market efficiency act in EMH indicates that does those forms real acts in the capital market should be analysed and proved.

Live Deal Inc. (ticker-LIVE) stock price and performance like all publicly traded stocks can be found in countless finance and trading information websites. The analysis reviews LIVEs five day stock performance in search of stock price and volume behavior and/or patterns as a result of publicly available information and/or insider information. Unable to meet the assignments original requirement due to a lack of positive stock surprises for the trading week of 12/26/14 to 01/02/15, the analysis focuses on negative stock surprises. In doing so, the analysis takes into consideration and use of the efficient market Hypothesis (EMH), irrational trading behavior, and technical analysis to identify trading patterns within the five day chart.

Efficient Market Hypothesis has been controversial issues among researcher for decades. Until now, there is no united conclusion whether capital markets are efficiency or not. In 1960s, Fama (1970) believed that market is very efficient despite there are some trivial contradicted tests. Until recently, both empirical and theatrical efficient market hypothesis was being disputed by behavior finance economist. They have found that investor have psychological biases and found evidences that some stocks outperform other stocks. Moreover, there are evidences prove that market are not efficient for instance financial crisis, stock market bubble, and some investor can earn abnormal return which happening regularly in stock markets all over the world. Therefore, the purpose of this essay is to demonstrate that Efficient Market Hypothesis in stock (capital) markets does not exist in the real world by proofing four outstanding unrealistic conditions that make market efficient: information is widely available and cost-free, investor are rational, independent and unbiased, There is no liquidity problem in stock market, and finally stock prices has no pattern.

The popularly accepted theory of how the stock market works is the Efficient Market Hypothesis (EMH) which says that share prices always reflect the available information about the market and the companies in question (Shleifer 2000). The theory tests three assumptions:

Richard Roll, and University and Auburn, University of Washington, and University of Chicago educated economist, began his career researching the effect of major events of stock prices. This experience likely helped him reach the two conclusions he makes in his 1977 “A Critique Of The Asset Pricing Theory’s Tests”, one of the earliest and most influential arguments against CAPM. In the paper, Roll makes two major claims: that CAPM is actually a redundant equation that just further proves the concept of mean-variance efficiency, and that it is impossible to conclusively prove CAPM. His first claim relates to mean-variance efficiency: the idea that mathematically one must be able to create a portfolio that offers the most return for a given amount of risk. Roll claims that all CAPM is doing is testing a portfolio’s mean variance efficiency, and not actually modeling out projected future returns. The second claim in the paper is that there is not enough data about market returns for CAPM to ever prove conclusive. Even if modern technologies could help alleviate some of the burden of testing market returns for publicly traded equities, there is still no way to account for the returns of less liquid markets, where there is less public information. This means it is impossible for

In this essay, we will look at the different forms of market efficiency; these include weak-form efficiency, semi-strong-form efficiency and strong-form efficiency. I will then discuss the anomalies of this theory and apply it to the efficient market hypothesis and look at the potential implications that this can have on the efficient market hypothesis (EMH). The EMH is a theory that stated it was impossible to beat the stock market; the reasoning behind it was that the stock market efficiency causes all existing share values to always include and reflect all relevant information. The theory states that all stocks trade at the fair value on all stock exchanges, therefore making it impossible for prospective investors to purchase stock which may be undervalued and then sell for an inflated price.

In this study, we used the event study methodology to examine if cash dividend announcements affect the stock prices of companies listed on the Palestine Exchange. We studied 62 events announced from 1/1/2006 to 31/12/2015. Appropriate statistical tests were used to examine if the cumulative abnormal return is statistically significant around the announcement day, namely, 10 days before and 10 days after the event day. Results reveal that statistically significant differences exist between cumulative abnormal returns and zero. Thus, investors could realize abnormal returns during the event window for the study period. The findings also indicate that a statistically significant negative relationship exists between dividend

Efficient Market Hypothesis (EMH) is a theory that states that it is impossible to beat the market due to the following reasons:

This essay aims to further identify and expatiate my knowledge on capital market research which investigates how disclosures of particular information influences aggregate trading activities taken by individuals participating within capital markets (Deegan ,2011). Through this module my understanding in capital market research that looks at the information content of accounting disclosures and capital market research that uses share price data as a benchmark for evaluating accounting disclosures has evolved. In this area of research, markets are deemed efficient and this theory will be explored further. The capital market is considered to be highly competitive, and as a result, newly released public information is expected to be quickly impounded into share prices.

There have been many studies done on earnings per share and its effect on market share price, and they found that earnings per share are what determine the market price. The first study conducted by Faris Nasif AL- Shubiri shows that changes in stock price can be affected by macro and micro economic factors. Simple and multiple regression were used and he found that “there is a highly positive significant relationship between market price of stock and net asset value per share” (Hemadivya & Rama Devi). The second study by Dr. Sanjeet Sharma analyzed earnings per share and market price, and he found that “earning per share is a strong determinant of market price” (Hemadivya & Rama Devi). The third study by Malakar and Gupta analyzed the share prices of eight similar companies and took inconsiderate of dividend per share, earnings per share, retained earnings, and sales proceeds of each company, and found that “earnings per share is [a] significant determinant of share price” (Hemadivya & Rama Devi). The fourth study by Tuli, Nishi, and Mittal gathered 105 earnings ratios from 105 companies and used them in a cross sectional analysis. From the cross sectional analysis, they found that “earnings per share were significant in determining the share price” (Hemadivya & Rama Devi). In the fifth study by Malhotra, a study was done on four different industries, and the result showed that “earnings per share had positive and significant influence on market price of equity shares.