Efficient market hypothesis Essay Example | Topics and Well Written Essays - 500 words

Efficient market dead reckoning - Essay ExampleFor the case of semi-strong diverseness, the prices of securities depend on the present and past data and not on the future expected in inventation. Fin eachy, the strong form contend that the prices of securities in the market reflect all the information i.e. past, present and future and that this information is in the domain of all the investors (Schwert 21). There is no opportunity to apply abnormal returns in a strong market.The strong market supports the efficient market hypothesis, as it is this form where investors argon never in a position to machinate abnormal profits without incurring high risk. The other two forms weak and semi-strong form fails to support the EMH because not all investors are privy to all the information about the market and therefore some investors are in a position to make above average rate of return without taking above average risks (Schwert 23). I however deliberate that there is no efficient mar ket. This is because the assumption in which the EMH is hinged are ideal i.e. that there are no transaction costs, that all investors have all past, present and future information and that the stock markets are efficient. These assumptions are idyllic and unattainable. Markets can therefore be in either the weak or semi- strong form in which case some investors have more information than others can. This can be shown from the many cases in which those in management positions have used insider information.Economists and psychologists in the behavioral finance sector however plead that in the short run, efficient markets are unattainable. This is because the prices of securities are influenced by other psychological factors like those that the chance in future prices. They further assert that security prices cannot be disseminated equally because of the bandwagon effect. Investors will therefore visit other factors in the