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Essay / Research Paper Abstract
Efficient Market Hypothesis, EMH, was developed in the 1960’s by Eugene Fama, today the theory remains one over which there is controversy. This 9 page paper begins by outlining the theory an the three variations; weak, semi-strong and strong. The paper then considers the evidence for each of these forms and looks at the way the theory has been tested over time to determine if it can be seen as accurate and which forms have the most support. The bibliography cites 12 sources.
Page Count:
9 pages (~225 words per page)
File: TS14_TEefficent.rtf
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Unformatted sample text from the term paper:
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). Therefore, it can be argued there is some empirical proof, but this use, that the theory has some value to investors. However, this does not mean that it is
an accurate theory. To assess this we need to look at the theory and how it can be justified and then consider if it is accurate. 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 models states 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). The
theory has been around a long time, and was first proposed by Eugene Fama, and evolved in the 1960s (Fama, 1965). The student may like to expand on this.
In this market there were assumed to be investors that were well informed, and worked in a logical manner; "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 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
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