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Essay / Research Paper Abstract
This 3-page paper explains the concept of Efficient Market Hypothesis by examining the trend of Citigroup Inc.'s stock. Bibliography lists 2 sources.
Page Count:
3 pages (~225 words per page)
File: D0_MTmarkciti.rtf
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Unformatted sample text from the term paper:
(Efficient Market Hypothesis). Such information can include anything and everything from prior performance, to public information, to insider information (provided the investor can obtain it).
Basically, if an investor subscribes to the EMH theory, he or she understands that there is no such thing as "beating the market" or buying undervalued stocks,
as stocks will always trade for a fair value on the exchange (Efficient Market Hypothesis). Because of this, an investor cant really "outperform" the market based on stock selection or
market timing (Efficient Market Hypothesis). In this particular scenario, CNN has reported that Citigroup posted its first profitable quarter in 18
months. With the companys share price hovering at less than a dollar, (and the fact that the quarter was profitable), it looks like a pretty good investment, because of the
better-than average quarter. Also, the Federal Reserves Beige Book (which indicates economic health by region) as positive as well - the Fed has also stated the financial sector should be
rebounding. The assumption here is that Citigroups stock price will rise, meaning it will be a good investment with high stock returns.
This is a good thought - and would be better if only a few people knew about it. However, given it was broadcast on CNN (which a lot of people
watch), the likelihood is that a lot of people are also thinking the same thing: Citigroup is at a low price right now, the financial market is liable to rebound,
so its time to buy it. This means a lot of people, with the same information, will want in on Citigroup stock. The first few people who buy the stock
...