efficient market hypothesis
TRANSCRIPT
• Efficient Market Hypothesis
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Corporate governance Systemic problems of corporate governance
1 Monitoring costs: A barrier to shareholders using good information is the cost of processing it, especially to a small
shareholder. The traditional answer to this problem is the efficient market hypothesis
(in finance, the efficient market hypothesis (EMH) asserts that financial
markets are efficient), which suggests that the small shareholder will free ride on the judgments of larger professional investors.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Ben Goertzel - Papers
1 * Pressing, J., Goertzel, B., Wood, T. Pazer, L. (2000). Enhanced market prediction using textual analysis: Limitations in the efficient market
hypothesis. Proceedings of the International Conference on
Advanced Investment Technology 1999, Bond University.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Quantitative behavioral finance - History
1 The prevalent theory of financial markets during the second half of the 20th century has been the efficient
market hypothesis (EMH) which states that all public information is
incorporated into asset prices
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
History of economic thought - Eugene Fama and the efficient market hypothesis
1 In 1965 Chicago School economist Eugene Fama (1939–) published The
Behavior of Stock Market Prices, which found that stock market prices follow a random walk, proposing the Efficient market hypothesis|Efficient Market Hypothesis, that randomness
is characteristic of a perfectly functioning financial market
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
History of economic thought - Other contemporary economists
1 Shiller (1946–) published Do stock prices move too much to be justified by
subsequent changes in dividends?, shocking the economics community by
challenging the accepted Efficient Market Hypothesis, arguing that in a
rational stock market, investors would base stock prices on the expected
receipt of future dividends, discounted to a present value
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Technical analysis - Scientific Technical Analysis
1 In this study, the authors found that the best estimate of tomorrow's price
is not yesterday's price (as the efficient market hypothesis would
indicate), nor is it the pure momentum price (namely, the same relative price change from yesterday
to today continues from today to tomorrow)
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Stock valuation - Market criteria (potential price)
1 Some feel that if the stock is listed in a well organized stock market, with a
large volume of transactions, the listed price will be close to the
estimated fair value. This is called the efficient market hypothesis.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
JEL classification codes - Financial economics JEL: G Subcategories
1 ::JEL: G14 – Information and Efficient market hypothesis|Market Efficiency;
Event study|Event Studies
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Market anomaly
1 A 'market anomaly' (or market inefficiency) is a price and/or rate of
return distortion on a financial market that seems to contradict the
efficient market hypothesis.[http://www.investorhome.com/anomaly.htm Market anomaly][http://www.investorhome.com/anom
aly.htm Historical Stock Market Anomalies]
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Adaptive market hypothesis
1 The 'adaptive market hypothesis', as proposed by Andrew Lo,Lo, 2004. is an attempt
to reconcile economic theories based on the efficient market hypothesis (which implies that
markets are market efficiency|efficient) with behavioral economics, by applying the
principles of evolution to financial interactions: competition, adaptation and natural
selection.http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20050207/SUB/
502070709/1008/TOC
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Adaptive market hypothesis - Details
1 According to Lo,Lo, 2005. the adaptive market hypothesis can be
viewed as a new version of the efficient market hypothesis, derived
from evolutionary principles:
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Fair price - Fair value vs market price
1 * The efficient market hypothesis asserts that, in a well organized,
reasonably transparent market, the market price is generally equal to or close to the fair value, as investors
react quickly to incorporate new information about relative scarcity, utility, or potential returns in their
bids; see also Rational pricing.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Gunduz Caginalp - Statistical time series modeling
1 The efficient market hypothesis (EMH) has been the dominant theory for financial markets for the past half
century
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Gunduz Caginalp - Mathematical modeling using differential equations
1 (I) Unlike the EMH, the model developed by Caginalp and
collaborators since 1990 involves ingredients that were marginalized
by the classical efficient market hypothesis: while price change
depends on supply and demand for the asset (e.g., stock) the latter can depend on a variety of motivations and strategies, such as the recent
price trendhttps://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Eugene Fama - Early life
1 All of his grandparents were immigrants from Italy.Colin Read, The
Efficient Market Hypothesists: Bachelier, Samuelson, Fama, Ross,
Tobin and Shiller, Palgrave Macmillan, 2012, [http://books.google.ca/books?
id=6EliRIe3uaECpg=PA94dq=%22Francis+Fama+(1910-?)
%22hl=ensa=Xei=ymZcUtvdJ9G64APl1IGYDgved=0CCMQ6AEwAA p
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Stock - Share price determination
1 In professional investment circles the efficient market hypothesis (EMH) continues to be popular, although this theory is widely discredited in academic and professional circles
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Modern portfolio theory
1 MPT also assumes that investors are Homo economicus|rational and
markets are efficient market hypothesis|efficient.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Modern portfolio theory
1 Further, there remains evidence that investors are not rational investor|rational and markets may not be
efficient market hypothesis|efficient.Andrei Shleifer: Inefficient
Markets: An Introduction to Behavioral Finance
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Modern portfolio theory - Assumptions
1 * 'All investors aim to maximize economic utility (in other words, to make as much money as possible,
regardless of any other considerations).' This is a key
assumption of the efficient market hypothesis, upon which MPT relies.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Modern portfolio theory - Assumptions
1 * 'All investors are rational and risk-averse.' This is another assumption of the efficient market hypothesis
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Neoliberalism - Neoliberal economics
1 At the same time, the efficient market hypothesis assumed that, because of catallaxy, the market
could not be informationally wrong
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Dow Theory - Six basic tenets of Dow theory
1 #: Stock prices quickly incorporate new information as soon as it
becomes available. Once news is released, stock prices will change to reflect this new information. On this point, Dow theory agrees with one of the premises of the efficient market
hypothesis.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Elliott wave principle - Criticism
1 The premise that markets unfold in recognizable patterns contradicts the
efficient market hypothesis, which states that prices cannot be
predicted from market data such as moving averages and volume
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Tulip mania - Modern views
1 However, research into tulip mania since then, especially by proponents of the efficient market hypothesis,
who are more skeptical of speculative bubbles in general,
suggests that his story was incomplete and inaccurate
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Tulip mania - Social mania and legacy
1 Despite the mania's enduring popularity, Daniel Gross of Slate
(magazine)|Slate has said of economists offering efficient market
hypothesis|efficient market explanations for the mania, that If
they're correct..
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Information good - Economic Theory and the treatment of Information
1 In Economics, information plays at least a double role. On one side,
perfect information is a key element to explain efficient market
hypothesis. Here, information is understood to be instantly available for everybody at no cost and being
complete.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
One share, one vote - Systemic problems of corporate governance
1 * Monitoring costs: A barrier to shareholders using good information is the cost of processing it, especially to a small shareholder. The traditional answer to this problem is the efficient market hypothesis
(in finance, the efficient market hypothesis (EMH) asserts that financial
markets are efficient), which suggests that the small shareholder will free ride on the judgments of larger professional investors.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Economic theory - Macroeconomics
1 Since at least the 1960s, macroeconomics has been
characterized by further integration as to microfoundations|micro-based
modeling of sectors, including rational expectations|rationality of
players, Efficient market hypothesis|efficient use of market information,
and imperfect competition.Yew-Kwang Ng|Ng, Yew-Kwang (1992)
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
George Soros - Reflexivity, financial markets, and economic theory
1 He argues that, when markets are rising or falling rapidly, they are
typically marked by disequilibrium rather than equilibrium, and that the conventional economic theory of the
market (the 'efficient market hypothesis') does not apply in these
situations
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Security market line - Security Market Line, Treynor ratio and Alpha
1 beta), which contradicts the efficient market
hypothesis.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
A Random Walk Down Wall Street
1 The book is frequently cited by those in favor of the efficient market hypothesis
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
A Random Walk Down Wall Street - Alternative view
1 In 1984 Warren Buffett gave a speech at Columbia University rebutting Malkiel's book and the Efficient Market Hypothesis. See The Superinvestors of Graham-and-Doddsville. As of 2013 Malkiel has not yet responded, and
has ignored Buffett's argument. As Seth Klarman has stated: Buffett's argument has never, to my knowledge, been addressed by the efficient-market theorists; they evidently
prefer to continue to prove in theory what was refuted in practice.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Financial market efficiency - Random Walk theory
1 Another theory related to the efficient market hypothesis created by Louis Bachelier is the “random
walk” theory, which states that the prices in the financial markets evolve
randomly and are not connected, they are independent of each other.
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Fundamentally based indexes - Rationale of weighting by fundamentals versus other methods of index weighting
1 The traditional method of capitalization-weighting indices
might by definition imply overweighting overvalued stocks and underweighting undervalued stocks,
assuming a Efficient market hypothesis|price inefficiency.Hsu,
Jason
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
Nobel Memorial Prize in Economic Sciences - Controversies and criticisms
1 Shiller claimed that Fama efficient market hypothesis makes little
sense, except in fairly trivial waysRobert J
https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
For More Information, Visit:
• https://store.theartofservice.com/the-efficient-market-hypothesis-toolkit.html
The Art of Servicehttps://store.theartofservice.com