Efficient Market Hypothesis ( Emh )

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EFFICIENT MARKET HYPOTHESISName: Mamunur Rahman Introduction Efficient Market Hypothesis (EMH) is a concept that was developed in 1960 's Ph.D. dissertation that was presented by Eugene Fama. The efficient market hypothesis states that, in a liquid market, the price of the securities reflects all the available information. The EMH exists in various degrees that include weak, semi-strong and strong, denoting the inclusion of non-public information in the market price. The theory contends that notion that it is possible to outperform the market. This is so because the market value contains all the available information and thus such attempts are chances and not skills. The weak EMH indicates that the market prices fully reflect all the…show more content…
There were other theories that were proposed by other scholars refuting and other supporting the hypothesis (Sewell 2012). Real Market Example The concept of the efficient market hypothesis has been investigated in various markets. An example is the London stock exchange. A study was carried out in the London Stock Exchange to determine whether the market is efficient or not. In spite of the fact that the concept has been discussed for over three decades, to date, there is still no agreement amongst the economist about its authenticity of the EMH theory. The analysis was done on the daily, weekly, monthly and annual Dow Jones data and took to evaluate whether the market can be defined as efficient or predictable. The results largely complied with the efficient market hypothesis by large. However, long-term data analyses were conducted, and there was no evidence of memory in the data that is consistency with EMH. The results concluded that the long-term analysis does not produce any long term good results as the opponents of EMH suggest. Nonlinear forecasting can yield some returns and thus the market was found to be a semi-strong form of efficiency. The idea is also supported by the common observation of particular company stocks responding to information released such as the expected income, planned mergers and acquisition and any other change that
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