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 ?
These three versions are known as (i) weak-form efficiency, (ii) semi-strong form efficiency and (iii) strong-form efficiency.
This anthology is hastily known as semi-Strong form efficiency.
Our findings further suggest that exchange rate markets may be efficient in semi-strong form and incorporate current and past macroeconomic information.
Tests of semi-strong form efficiency (Fama, Fisher, Jensen, and Roll, 1969; Ball and Brown, 1968; Aharony and Swary, 1980, 1981; Joy, Litzenberger, and McEnally, 1977; Watts, 1978; Patell and Wolfson 1984; Scholes, 1972; Kraus and Stoll, 1972; Mikkelson and Partch, 1985; Dann, Mayers, and Raab, 1977) document the claim that no investor can earn an above normal return on publicly available information such as accounting statements, stock splits, dividend announcements, sale of stock announcements, repurchase of stock announcements, block trades, and earnings announcements.
Semi-strong form efficiency uses variables that are obviously publicly available, and strong form uses anything else.
c) derecognized in the semi-strong form route when factors concerning
For the semi-strong form of market efficiency, the information set is all publicly available information.
For example, Barney and Hansen (1994) identified three types of trust: weak form, semi-strong form, and strong form.
It summarizes the main results of studies that test the semi-strong form of the Efficient Market Hypothesis and explains and interprets the studies used to test its strong form.
Semi-strong form, which states that all publicly available information regarding the prospects of the firm must be reflected in the stock price.