Evaluating The Efficient Market Hypothesis

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1. Abstract The Efficient Market Hypothesis expresses that assets prices should reflect all the information available in the financial markets. However, information is changing rapidly and therefore, prices should adapt quickly. This document states and discusses the main ideas behind the Efficient Market Hypothesis providing information about its three versions Weak Form Efficiency, Semi-Strong Form Efficiency and Strong Form Efficiency. The Efficient Market Hypothesis, might be a debatable concept and some authors have particularly provided evidence in favour including the concepts of different tests to support their arguments. On the other hand, those who support ideas against the EMH sustain their arguments on topics like,…show more content…
In other words, in current market it reflects all the information. The current market is important in any financial market because it gives benefits to the investors. 3. What is efficient market hypothesis? It reflects the information of the current stock value which fully reflects with available funds about the value of firm by using this business cannot make more profit it is also state that there is no way or impossible to “beat the market”. It is also known as the investment theory or random walk theory (Malkiel, Winter, 2003), (Clarke, Jandik, & Mandelker, 2001) it gives the clear idea about elements on which bases the price change in the security market and how it brings the changes in the market. The EMH recommend that the assuming price movement will be difficult and no expectable in achieving the profit. The element behind changing the price is arriving new information in the market. If the new prices adapt quickly and on average without prejudice, then the market is called efficient market”. The reality of an efficient market is that, there is an intense competition between the investors to achieve profit when the new information comes in the market. So, it is very important to identify over and under-priced stock for the investors to buy some stock less than true value can sell than their worth value for profit. In efficient market very data and information is open and all the investments is reasonably
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