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 ?
It's one of the most inefficient markets I've ever seen," said Arjun Balaji an engineer who trades cryptocurrencies and surveyed the dot-com bubble from his vantage point in kindergarten.
New business models will grow in industries that understand "that inefficient markets are going to become more efficient through this technology, and making people comfortable with this notion of radical transparency," Jobanputra said.
Pedersen, Copenhagen Business School, "Efficiently Inefficient Markets for Assets and Asset Management" (NBER Working Paper No.
Thus, there is a need to review the variance bound test of Shiller (1979) and LeRoy and Porter (1981) which states any excess volatility in the price of any asset is the result of inefficient markets as argued by Shiller (1992).
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.
All of the Emerald Funds focus on inefficient markets where Emerald's active management and fundamental research-based investment strategies can exploit under-recognized potential investment opportunities.
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.
Such schemes are more likely to have a significant effect on prices in inefficient markets and are unlikely to succeed in efficient markets.
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.
Inefficient Markets begins with an assessment of the strength of the three basic assumptions underlying the traditional theory of efficient markets.