Our View on Efficient Market Hypothesis

For about ten years after publication of Fama's classic exposition in 1970, the Efficient Markets Hypothesis dominated the academic and business scene. A steady stream of studies and articles, both theoretical and empirical in approach, almost unanimously tended to back up the findings of EMH. As Jensen (1978) wrote: ‘There is no other proposition in economics which has more solid empirical evidence supporting it than the EMH.’

Efficient-market hypothesis - Wikipedia

Efficient Market Hypothesis - EMH - Investopedia

Investor Home - The Efficient Market Hypothesis

According to the efficient-market theory, you'd be best advised to followa PASSIVE INVESTMENT STRATEGY:Switch to index funds (mutual funds that simply track astock-market average, rather than being actively managed),and hold them over a very long time period (a buy-and-hold, notbuy-and-sell, strategy).

Efficient Market Hypothesis: Is The Stock Market Efficient?

The efficient-market hypothesis (or theory) says the stock market asa whole does the best jobpossible in valuing and pricing stocks. The market acts rationally,says the theory, using allavailable, relevant information and leaving no profit opportunityunexploited. This would implythat strategic stock picking is pointless, because the market hasalready priced every stockappropriately, given the current information.

The efficient-market theory is an application of a theory that has beenextremely influential inmacroeconomics over the past thirty years, namely--

The classic statements of the Efficient Markets Hypothesis (or EMH for short) are to be found in Roberts (1967) and Fama (1970).
Investor Home - The Efficient Market Hypothesis and Random Walk Theory

1 Answer to According to the efficient market hypothesis: a

We deal with the issue of efficient market hypothesis. We examine the proposition that the best predictor for future spot price index is the future price. In addition, we adapt simple econometric model to recent Korean market data by empirical analysis. Our strategy is as follows: first, we test random walk hypothesis by AR estimation and unit-root test. Then, we examine the efficiency of index future market by least squares(distributed–lags), VAR and cointegration estimation. Finally, we conclude the predictability of stock index prices in both spot and future market by overall examination of empirical results.

According to the Efficient Market Hypothesis, professional investors will earn: A

First let’s talk about what Efficient Market Hypothesis is

There are arguments involved with the validity of efficient market hypothesis. Some observers question on the market to behave consistently with this hypothesis. Some economists and mathematicians believe that a man made market is affected by various factors and cannot behave according to the efficient market hypothesis. When there are some surprising changes in the market, the imperfection in the efficient market hypothesis becomes most evident.

Quiz & Worksheet - Efficient Market Hypothesis? | …

What is involved in an efficient market hypothesis

The concept of 'efficient market hypothesis' was introduced by Eugene Fama in mid-1960s. According to this concept, the intense competition in the capital market leads to fair pricing of debt and equity securities. The concept is based on the reflection of relevant information in market prices of the securities. If only past information is reflected in 'weak-from efficient markets; past as well as present information is reflected in 'semi-strong form efficient markets'; past, present, and future information is reflected in 'strong-form efficient markets'.
Efficient market hypothesis has profound implications for corporate finance and investment management.
Implications for corporate finance
1. Managers cannot fool the market through creative accounting.
2. Firms cannot successfully time issues of debt and equity.
3. Managers cannot profitably speculate in securities market.
4. Managers can reap benefits by paying attention to market prices.
Implications for investment management
1. If the market is efficient in weak-form, investors can not obtain abnormal returns by analyzing relevant historical information about the securities. However, it is possible to obtain abnormal returns by analyzing current information and future information. Thus, investment tools like filter strategy, technical analysis will not be effective. Fundamental analysis will be an effective approach for investment management.
2. If the market is efficient in semi-strong form, analysis of relevant historical and current information is of no use for gaining abnormal returns. Only access to future information will give abnormal returns. Thus, filter strategy, technical analysis, and fundamental analysis will not be effective for investment management.
3. If the market is efficient in strong-form, analysis of past, present, and future information is of no use to gain abnormal returns. Random selection of the stocks based on defined returns or risk will be the best approach for investment. Portfolio investment will be the only way to maximize returns for given level of risk or minimize risk for given level of returns.