next plc ratio analysis

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Efficient market hypothesis and stock price movements Corporate finance, Lecturer-David Mutlow, 31/10/13 Student no-21185372 Contents 1. Introduction 2. Fundamental and Technical analysis 3. Efficient market…show more content…
4) In an efficient market there is no uncertainty because all available information known by everyone, but in in efficient market there is an uncertainty so we don’t know which company makes profit. Which will not be? Increase in business uncertainty activity changes the opinion of investors; it cause to decreased investment in the particular sectors, compared to increased investment in a sector which offers certainty. The increased in uncertainty lead to bubbles take place in the market, if investors decrease to invest in a particular sector which leads to its decrease in bubble. There would be no bubbles created in the efficient market. In the efficient market everyone make a decision based on the information they have got. In the real circumstances, there is an agency problem so the agents know more information than the shareholder, so they make high investment and make abnormal profit. This is known as a corporate fraud. If the investors find out about this the fraudulent activity then this cause to stop the investments in particular sector. This lead to decrease share price in particular sector. If the price gone up this means that market is in-efficient. In the efficient market no one can make profit by trading information because it’s available on public and new information available as well. In real circumstances arbitrage opportunities are created based on new information and
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