Efficient Market Hypothesis

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Efficient Market Hypothesis

States that all relevant information is fully and immediately reflected in a security's market price, thereby assuming that an investor will obtain an equilibrium rate of return. In other words, an investor should not expect to earn an abnormal return (above the market return) through either technical analysis or fundamental analysis. Three forms of efficient market hypothesis exist: weak form (stock prices reflect all past information in prices), semistrong form (stock prices reflect all past and current publicly available information), and strong form (stock prices reflect all relevant information, including information not yet disclosed to the general public, such as insider information).

Efficient Market Theory

A controversial model on how markets work. It states that the market efficiently deals with all information on a given security and reflects it in the price immediately. The model holds that technical analysis, fundamental analysis, and any speculative investing based on them are useless. The model has three forms: weak efficiency, which holds that technical analysis is ineffective, semi-strong efficiency, which holds that fundamental analysis is ineffective, and strong efficiency, which states that even insider information is immediately reflected in the security prices. Investors and academics disagree on how well the model works.
References in periodicals archive ?
Energy Africa will take on the inefficient markets, policy barriers and under-investment which mean that Africans pay as much as 66 times more for their electricity than someone in the UK.
Our opportunity sets are non-agency mortgages and corporate structured credit, both inefficient markets, where our proprietary analytics provide a unique advantage in finding undervalued optionality.
Roger Farmer, University of California, Los Angeles and NBER, and Carine Nourry and Alain Venditti, University of the Mediterranean, "The Inefficient Markets Hypothesis: Why Financial Markets Do Not Work Well in the Real World" (NBER Working Paper No.
Named one of the world's top 40 international development innovators, DAI works on the frontlines of international development, tackling fundamental social and economic development problems caused by inefficient markets, ineffective governance, and instability.
However, Lebanon has inefficient markets, and banks do not play a real role in lending to productive sectors at low interest rates and with facilitating terms.
A cottage industry, where inefficient markets made the opportunities afforded to investors that much easier to access, has matured into a professional, highly competitive global business that can now command the top talent from within financial services.
And any global GHG abatement strategy must confront the problems of weak legal systems, corruption, and inefficient markets that Bell highlights.
eBay and other innovators will continue to apply new technologies to inefficient markets.
The third theme is that biased heuristics and framing of investment decisions leads to inefficient markets.
It is this "human element" that goes to the fundamental concept that real estate markets are inefficient markets marked by unique goods.
In more technically precise terms, analyzing comparable sales drawn from inefficient markets, where general linear relatedness and specific nonlinear variance occur, suggests the need for a statistic that avoids imposing linear assumptions on nonlinear and contradictory variances.
The MPT marketplace is basically efficient, but ETIs are bred of inefficient markets.