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Topic: Efficient market hypothesis

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	Efficient Market Hypothesis by Alvin Han
		Efficient market hypothesis is the idea that information is quickly and efficiently incorporated into asset prices at any point in time, so that old information cannot be used to foretell future price movements.
		However semi strong form market efficiency suggests that fundamentals analysis cannot be used to outperform the market.
		In the first study on weak form efficiency, the researchers have strong evidence to prove their conclusion as 4 statistical tests are being used to reinforce the result.
	www.alvinhan.com /Efficient-Market-Hypothesis.htm (2549 words)

	Efficient market hypothesis - Wikipedia, the free encyclopedia
		The efficient market hypothesis implies that it is not possible to consistently outperform the market — appropriately adjusted for risk — by using any information that the market already knows, except through luck.
		Beyond the normal utility maximizing agents, the efficient market hypothesis requires the agents have rational expectations; that on average the population is correct (even if no one person is) and whenever new relevant information appears, the agents update their expectations appropriately.
		Opponents of the EMH sometimes cite examples of market movements that seem inexplicable in terms of conventional theories of stock price determination, for example the stock market crash of October 1987 where most stock exchanges crashed at the same time.
	en.wikipedia.org /wiki/Efficient_market_hypothesis (1856 words)

	Efficient Markets and Irrational Investors - Graziadio Business Report
		Event studies found that the market quickly reacts to new information and studies of professional investors' performance made a strong case for the strong form market efficiency.
		We can only test a joint hypothesis stating that, first, the market is efficient in equating asset prices with their intrinsic values, and, second, we know what the intrinsic values are; i.e., we have a perfect asset pricing model.
		Since there is rarely such indication in the equity markets -- the evidence of being able to outperform the market is usually mixed, especially when considered on a risk-adjusted basis -- individual investors should give a serious thought to indexing their equity holdings and seeking skill-based return enhancement elsewhere.
	gbr.pepperdine.edu /022/stockmarket.html (2501 words)

	Efficient Market Hypothesis as supplied by EagleTraders.com
		The efficient market hypothesis of movements of stock prices in its weak variant stands for the proposition that successive stock prices are mostly unrelated and that prices tend to move in a random manner.
		All three variants of the efficient market hypothesis challenge the validity of fundamentals analysis and technical analysis, and in turn are challenged by adherents of the fundamental and technical approaches.
		The efficient markets theory, or what is also called “the new investment technology,” is the idea that security markets are efficient and that investment rewards are related to risk.
	www.eagletraders.com /advice/securities/effecient_market_hypothesis.htm (587 words)

	articles @ accountancy.com.pk > Efficient Market Hypothesis - Raising Eyebrows
		The EMH is notionally based on the theory of random walks, which gives an idea of no prediction role of analysts and chartists in stock markets.
		Outperforming the market is the subject matter but the market efficiency makes it impossible for an investor, thus leading to passive fund management instead of active fund management.
		The efficient market is defined as “A market having a large number of rational profit maximisers, actively competing with each trying to predict future market values of individual securities, and where important current information is almost freely available to all participants”.
	www.accountancy.com.pk /pr_pg_article.asp?id=150 (2099 words)

	INEFFICIENT VS EFFICIENT MARKET HYPOTHESIS (Site not responding. Last check: 2007-10-14)
		Efficient Market Hypothesis (EMH) was originally proposed in the 1960s in a PhD by Eugene Fama, who believed that investors made well informed and intelligent decisions.
		When markets mirror fundamental value for extended periods, EMH would foster the belief that this was evidence of an efficient market.
		The market tends to rise on a new Moon and fall on a full Moon with statistical significance and applies to most world markets (Kathy Yuan et al, 2001 and Ilia Dichev and Troy James, 2001).
	www.davidmcminn.com /pages/inefficient.htm (2571 words)

	Efficient Markets Hypothesis
		However, conventional tests of the random walk hypothesis were very 'weak', in the sense that the evidence would have to be very strong to reject this null hypothesis.
		EMH is probably one of the more resilient empirical propositions around (albeit, see Robert Shiller's (1981) critique), yet it does not seem to have a clearly sound theoretical standing.
		Alternatively, the degree of market inefficiency determines the effort investors are willing to expend to gather and trade on information, hence a non-degenerate market equilibrium will arise only when there are sufficient profit opportunities, i.e., inefficiencies, to compensate investors for the costs of trading and information-gathering.
	www.e-m-h.org (993 words)

	Efficient Market/Random Walk
		EFFICIENT MARKET THEORY: This long time theory tests whether all information about a stock, bond or company is instantaneously available to all interested parties at the same time (strong form) or whether there is other information which is available only to certain other investors on which they have a trading advantage (weak form).
		EFFICIENT MARKET: (1999) I have commented in the past that, while there is a fundamental to the efficient market where "all" information is known at "all" times and that no direct patterns should be evident, there are inconsistencies in this formula and that certain predictable trading patterns have actually emerged.
		Efficient Market (Malkiel pdf 2005) In recent years, many financial economists have come to question the efficient market hypothesis.
	www.efmoody.com /investments/efficientmarket.html (3279 words)

	Efficient financial market
		The EMH became controversial after the detection of certain anomalies in the capital markets that were apparently inconsistent with the theories of asset-pricing behaviour.
		Even though the EMH has some weaknesses in the market pricing mechanism, that have led researchers to question it and to consider alternate modes of theorizing market behaviour, the concept of efficiency is difficult to deny.
		The EMH is associated with the idea of a “random walk,” which implies that the next move of the speculative price is independent of all past moves or events, so historic prices are of no value in predict future prices.
	html.rincondelvago.com /efficient-financial-market.html (17448 words)

	The Mostly Efficient Market Hypothesis
		The efficient market hypothesis, or EMH, is a fiercely-debated theory.
		The EMH was first described in the 1967 Ph.D. dissertation of Eugene Fama, now a finance professor at the University of Chicago.
		A major assumption of the EMH is that market participants are fully informed and rational.
	www.thestreet.com /funds/managerstoolbox/10003635.html (826 words)

	THE EFFICIENT MARKET HYPOTHESIS ON TRIAL
		If the evidence is against market efficiency, it may be because the market is inefficient, or it may be that the model is incorrect.
		If the market were efficient, one would expect the prices of stocks of these companies to go up to a level where the risk adjusted returns to future investors would be normal.
		In his analogy of the stock market as a "beauty contest", Keynes notes that the goal of the investor is often to pick the girl that others would consider prettiest rather than choosing the one he/she thinks is prettiest.
	www.westga.edu /~bquest/2002/market.htm (8253 words)

	The Efficient Market Hypothesis
		The Efficient Market Hypothesis is the proposition that financial security markets are informationally efficient; i.e., the current price incorporates all information known currently concerning factors in the future which may affect the price of a stock.
		The origins of the Efficient Market Hypothesis (EMH) can be traced to Louis Bachelier in terms of theory and to Alfred Cowles' discovery, in practice, that apparently no one can predict the changes in stock prices.
		The Efficient Market Hypothesis says, in effect, that because the market is informationally efficient there is a simple forecast of the future price of a stock based upon its current price.
	www2.sjsu.edu /faculty/watkins/emh.htm (386 words)

	Stock Market Perspective: (Non-) Efficient Market Hypothesis
		At first, usually after some significant news about the company, the market in general, or the economy, the zigzags will overshoot in one direction, and then overshoot to a lesser extent in the opposite direction, and so on in what can be a convergent manner.
		Either the market for these stocks was far from efficient in March 2000 or those bidding up the prices did not have a very good idea about their “true” value.
		That supports what I said earlier: that the market is efficient in the long run, but that is no reason to give up trading and other forms of active investment management and instead to invest passively only in things like index funds.
	www.pankin.com /persp041.htm (1805 words)

	efficient-market hypothesis (Site not responding. Last check: 2007-10-14)
		Whenever one of these crashes happens the concept of market efficiency and the cause of fluctuations tend to be heavily debated.
		The thesis holds that markets are extremely efficient in the sense that all information about the past, the present and the future are swiftly built into share prices.
		If these markets had attained the degree of perfection that advocates of the market-efficiency theory claim for them then they would cease to be markets.
	www.brookesnews.com /042009markets.html (576 words)

	Financial Concepts: Efficient Market Hypothesis
		Efficient market hypothesis (EMH) is an idea partly developed in the 1960s by Eugene Fama.
		If markets are efficient and current, it means that prices always reflect all information, so there's no way you'll ever be able to buy a stock at a bargain price.
		Their argument against the efficient market theory is that many investors base their expectations on past prices, past earnings, track records and other indicators.
	www.investopedia.com /university/concepts/concepts6.asp (297 words)

	Philip Greenspun’s Weblog » 2005 » April » 17 (Site not responding. Last check: 2007-10-14)
		“An ‘efficient’ market is defined as a market where there are large numbers of rational, profit-maximizers actively competing, with each trying to predict future market values of individual securities, and where important current information is almost freely available to all participants.
		In an efficient market, competition among the many intelligent participants leads to a situation where, at any point in time, actual prices of individual securities already reflect the effects of information based both on events that have already occurred and on events which, as of now, the market expects to take place in the future.
		Applied to romance, the Efficient Market Hypothesis says that if the guy were actually worth dating one of the millions of women who live within a 30-mile radius of his house would have figured it out.
	blogs.law.harvard.edu /philg/2005/04/17 (429 words)

	Efficient Market Hypothesis Notes (Site not responding. Last check: 2007-10-14)
		A more moderate form of this type of market efficiency states that an abnormal return could be earned to the extent of fairly compensating the most efficient analyst for the effort spent accurately analyzing stocks to determine true mispricing.
		For example, suppose that Intel were to announce they had invented a new way to manufacture computer chips that would make computers run ten times faster at half the cost, but that it would take at least a year to implement in all their manufacturing plants.
		An efficient market implies that the stock price would increase immediately when the information is available -- not a year from now when the technology is implemented or even later when extra profits are received.
	www.ualr.edu /lcholland/fin8310/f8310emh.html (370 words)

	The Market Classroom (Site not responding. Last check: 2007-10-14)
		Initially it will just be about the stock market, but as time goes on information about bonds, derivatives and foreign exchange markets will be added.
		efficient market hypothesis, capital asset pricing model, behavioral economics etc...) will be added soon.
		What would be appreciated is requests for lessons on certain subjects pertaining to financial markets, notifying me of bad links and ways to improve the navigation on the site, and letting me know if some things are hard to understand so I can try to explain then in a clearer manner.
	www.geocities.com /themarketclassroom (197 words)

	The Efficient Market Hypothesis: A Survey
		The efficient market hypothesis states that asset prices in financial markets should reflect all available information; as a consequence, prices should always be consistent with ‘fundamentals’.
		In this paper, we discuss the main ideas behind the efficient market hypothesis, and provide a guide as to which of its predictions seem to be borne out by empirical evidence, and which do not.
		Most importantly for the wider goal of efficient resource allocation, financial market prices appear at times to be subject to substantial misalignments, which can persist for extended periods of time.
	ideas.repec.org /p/rba/rbardp/rdp2000-01.html (1431 words)

	Hulbert Attacks Efficient Market Theory
		The article makes the claim that efficient market theory is dead and useless with laughable logic and evidence.
		What the most popular "semi-strong" form of efficient theory suggests is that reliably predicting performance from published information is a waste of time because that information is factored into a stock price.
		According to Rau, this study does not offer conclusive evidence against even the rigorous "semi-strong" form of efficient theory, and it certainly does not claim that inefficiency is pervasive and easy to spot in advance.
	www.indexfunds.com /PFarticles/19990914_hulbert_com_md_WM.htm (590 words)

	The Mother of All Hedge Funds & The Efficient Market Hypothesis
		The efficient market hypothesis is a theory, based upon countless scientific studies, of how the securities markets work.
		It states that, because information relating to factors affecting security prices and markets is transmitted to, and assimilated by, investors and potential investors so rapidly, the price of any security or level of any market, at any time, almost instantly reflects any and all publicly available information about that security or market.
		No investor should ever expect to outperform the market sector in which he invests; nor should he ever expect to be able to employ professionals who can do it for him, no matter how brainy those professionals may profess to be.
	www.dows.com /Publications/Mother_Of_All_Hedge_Funds.htm (2280 words)

	The Efficient Capital Market Hypothesis Revisited: Implications of the Economic Model for the United States Regulator
		Most capital market regulation is expressly or implicitly based on a theory of how the regulated market works.
		The Efficient Capital Market Hypothesis is an economic model, which assumes that the market is comprised of a large number of rational participants and that information is fully and quickly available to them.
		Two factors played an important role in leading to the corporate scandals of the early 2000’s: a) auditors’ misperception that their responsibilities was to serve the management, and b) the need for CEOs and CFOs to ensure that financial information (particularly referred to quarterly and annually financial disclosures) be accurate.
	www.bepress.com /gj/advances/vol5/iss1/art3 (408 words)

	Mahalanobis
		Nevertheless, one of the central insights of modern financial economics is the necessity of some trade-off between risk and expected return, and although Samuelson’s version of the Efficient Markets Hypothesis places a restriction on expected returns, it does not account for risk in any way.
		This was demonstrated conclusively by LeRoy (1973) and Lucas (1978), who construct explicit examples of informationally efficient markets in which the Efficient Markets Hypothesis holds but where prices do not follow random walks.
		They argue that perfectly informationally efficient markets are an impossibility, for if markets are perfectly efficient, the return to gathering information is nil, in which case there would be little reason to trade and markets would eventually collapse.
	mahalanobis.twoday.net /stories/411646 (871 words)

	Bill Miller, Money Master: Part 2 [Fool.com: Commentary] July 25, 2006
		If you recall, the EMH debates the degree to which the market reflects all available information about a company and whether an investor should be able to outperform the market.
		For example, the strong-form EMH believes that the stock market discounts all public and private information very quickly and that it is impossible to "beat" the market.
		Miller stated that he believes the market is "pragmatically efficient," meaning that although he believes a manager can outperform the market, it is no easy task, since investing is extremely competitive.
	www.fool.com /news/commentary/2006/commentary06072517.htm (984 words)

	Efficient Markets Hypothesis (Site not responding. Last check: 2007-10-14)
		Sanford Grossman, "On the Efficiency of Competitive Stock Markets Where Trades Have Diverse Information", Journal of Finance, Volume 31, Issue 2, Papers and Proceedings of the Thirty-Fourth Annual Meeting of the American Finance Association Dallas, Texas December 28-30, 1975 (May, 1976), 573-585.
		Jean-Jacques Laffont and Eric S. Maskin, "The Efficient Market Hypothesis and Insider Trading on the Stock Market", The Journal of Political Economy, Volume 98, Issue 1 (Feb., 1990), 70-93.
		Yi-Cheng Zhang, "Toward a Theory of Marginally Efficient Markets", Physica A, 269, 30-44, 1999.
	www.econ.unian.it /servizi/hpp/modina/BibliografiaCapitalMarkets.html (971 words)

	Efficient Market Canada - Wikipedia, the free encyclopedia
		Efficient Market Canada is an Canadian financial publication offering investment advice to Canadian investors based on the efficient market hypothesis.
		Efficient Market Canada is edited by Martin Gale, and funded solely by advertising revenue.
		It is one of a number of Canadian financial publications.
	en.wikipedia.org /wiki/Efficient_Market_Canada (116 words)

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