The Efficient Market Hypothesis

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Introduction
There is a fierce debate on whether stock market is efficient all these years. Some people advocated Fama’s research in 1960s, and they believe that the Efficient Markets Hypothesis has been well established. However, others do not agree with. They found some evidence to prove market inefficient by empirical researches. This essay mainly focuses on the Efficient Markets Hypothesis, and there are six parts to discuss. Firstly, it will compare the random walk theory and the weak-form of the Efficient Markets Hypothesis; Secondly, it will choose two empirical studies against the weak-form of the Efficient Markets Hypothesis; Thirdly, it will assess the semi-strong form with the weak-form the Efficient Markets Hypothesis; Fourthly, it will evaluate the semi-strong form of the Efficient Markets Hypothesis by two of empirical studies; Fifthly, it will identify the contrast between the strong form of the Efficient Markets Hypothesis with both weak form and semi-strong form; Last but not least, it will use one empirical study to judge the strong form.

The random walk theory is a financial theory asserting that stock market prices change randomly and no one can predict their trends of patterns (Brealey et al., 2012). Bachelier first proposed the concept of the random walk theory in 1900 (Fama, 1970). However, it is well-known by Kendall in 1953 (Brealey et al., 2012). The Efficient Markets Hypothesis was developed by Fama in 1970 (Fama, 1970). In his paper, he defined

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