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Essay / Research Paper Abstract
This 5 page paper is written in two parts. The first part of the paper considers the implications for the weak-form Efficient Market Hypothesis (EMH) concerning the findings of certain authors that have recently found evidence of positive autocorrelation in short-term stock returns and negative autocorrelation in longer horizon returns. The second part of the paper looks at the idea positive abnormal returns prior to stock splits, discusses why this may occur and looks at whether or not this is consistent with semi-strong form efficiency. The bibliography cites 5 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEautosplit.rtf
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Unformatted sample text from the term paper:
autocorrelation in short-term stock returns and negative autocorrelation in longer horizon returns (Khil and Lee, 2002). If this is the case there are some implications for the weak form of
efficient market hypothesis. To consider these implications the first stage is to look at EMH in its weak form and then consider the manifestations of the autocorrelations to assess
the implications for weak form EMH. Efficient Market Hypothesis (EMH) is a theory that looks at the way in which the movement of stock prices may be assessed as a
result if the information in the markets. This is a theory that was developed for the most part at the University of Chicago, the theory is both a stand alone
theory as well as forming an integral part of more complex ideas, such as Modern Portfolio Theory (Freeman, 2001). The basic idea is that it is not possible to
beat market prices as the prices will already include the relevant market information (Fama, 1965, 1991). The theory is both controversial and disputed. Those who support the hypothesis state they
believe it is useless to attempt to identify stocks that are undervalued or indulge in market predictions, and there are many academics that will support this hypothesis. The idea
is that, at any given point in time, the price of the stocks or securities, will reflect the information that is currently available about the stock itself and about the
market (Fama, 1991). There are different variations on this model. The three forms that are currently seen as the weak form, the
semi-strong form and the string form (Freeman, 2001). With the first form, the weak form, the model looks at information that considers the past prices, in the semi-strong form there
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