Efficient Markets hyphotesis Essay Example | Topics and Well Written Essays - 2000 words

Efficient Markets hyphotesis - Essay ExampleThis simple concept has remarkable repercussions for the pecuniary grocerys and investors alike. In this paper we will talk about the economic commercialize hypothesis in considerable detail with reference to technical and fundamental analysis. We will talk about food market efficiency and types of market efficiencies. The concepts of random walk and fair game model will also be discussed. In the stop over test and studies conducted to prove the efficient market hypothesis will be presented alongside with the conclusion. The efficient market hypothesis proposes that assets in pecuniary markets are priced after taking all the public information ready(prenominal) into account. This means that people might not be able to earn abnormal profit consistently for a long period of time. Efficient market hypothesis entails that investors cannot earn more than the average market returns by taking similar risk exposure as the market. This hypo thesis therefore suggests that markets are efficient information wise and all the public information about an asset is perfectly reflected in the market. An unadorned consequence of efficient market hypothesis, if accepted, is that markets always go towards equilibrium and this in turn means that financial markets are rational in general. Critics of efficient market hypothesis tend to dispute the rationality of the markets as they feel that this hypothesis is not able to explain market crashes (Fox, 2009). If market is overall rational then(prenominal) all investors should immediately.