The Existence Of Efficient Market Hypothesis Emh In The International Financial Markets

Seminar paper from the year 2018 in the subject Economics - Finance, grade: 1, , language: English, abstract: The Efficient Market Hypothesis (EMH) theory commonly referred to as the Random Walk Theory is one of the most debated topics in finance studies over the years because of the growing concerns that investors can trade on the available information so as to make abnormal profits in the market. EMH states that the price of a security (current stock prices) in the market reflects all the available information on its fundamental value at all times, hence investors cannot make any abnormal profits above the market prices using this information. EMH explains why changes in security prices occur and how those changes happen, hence very crucial to investors as they make their investment decisions in the security market. Many investors both domestic and global invest on securities that are undervalued as they expect their value to increase in the future. Other investors including investment managers also stress that they are able to choose those securities that can outperform the market prices with the core objective of gaining more profits. EMH argues that none of these assumptions is effective because the advantage gained is less than the transaction costs incurred such as research costs on the information hence not in a position to outperform the market price of these securities

Research Paper (undergraduate) from the year 2008 in the subject Business economics - Investment and Finance, grade: 1.7, The FOM University of Applied Sciences, Hamburg, language: English, abstract: Especially after the 90ies, where the stock markets raised enormously, many private investors joined the stock market and were blended by abnormal profits and neglected possible losses. The same behavior could be observed before the Financial Crisis became reality. But each endless raising stock market would finally collapse, because stock prices are randomly and only driven by relevant news. The adjustment to the news is quickly. This is the theoretical argumentation of the Efficient Market Hypothesis (EMH), which will be evaluated in this paper. The author gives an overview about the EMH by explaining the basic principles and its mathematical formulation. The practical part evaluated the EMH on selected examples, where the theory could only be partly approved.

The Efficient Market Hypothesis (EMH) asserts that, at all times, the price of a security reflects all available information about its fundamental value. The implication of the EMH for investors is that, to the extent that speculative trading is costly, speculation must be a loser's game. Hence, under the EMH, a passive strategy is bound eventually to beat a strategy that uses active management, where active management is characterized as trading that seeks to exploit mispriced assets relative to a risk-adjusted benchmark. The EMH has been refined over the past several decades to reflect the realism of the marketplace, including costly information, transactions costs, financing, agency costs, and other real-world frictions. The most recent expressions of the EMH thus allow a role for arbitrageurs in the market who may profit from their comparative advantages. These advantages may include specialized knowledge, lower trading costs, low management fees or agency costs, and a financing structure that allows the arbitrageur to undertake trades with long verification periods. The actions of these arbitrageurs cause liquid securities markets to be generally fairly efficient with respect to information, despite some notable anomalies.

Seminar paper from the year 2018 in the subject Business economics - Market research, grade: 1,0, accadis Hochschule Bad Homburg, course: International Finance, language: English, abstract: This project will focus on the Efficient Market Hypothesis which is used in the form of its abbreviation EMH during the next sections. In this context, in Part A EMH will be examined in the context of the Dow Jones Industrial Average, which includes 30 components and is America's most prominent and globally applied stock index. Multiple economists have taken studies of efficient market hypothesis to their main subject, subsequently, efficient market hypothesis is one of the most common and observed theories in modern finance. Today, EMH is widely used and prospers from frequent testing, which, in the past, has led to new findings, more precisely, different emphasis of EMH. During his research, the previously mentioned economist Fama investigated in his test that there must be three emphasis of EMH, which he differentiated into weak form market efficiency, semi-strong form market efficiency as well as strong form market efficiency. In the modern theory of finance, the most known starting theory is that of efficient capital markets. In repetition to part A of this assignment, the term "efficiency" denotes the fact that investors have no opportunity of obtaining abnormal profits from capital market transactions as compared to other investors, so that they cannot beat the market. Consequently, investors are forced to invest in higher risk assets to increase the probability of gaining short term profits. The EMH theory is very controversial and many opposing opinions regarding this theory exist. By empirically testing, this assignment outlines the insufficiency to reject Weak Form Market Efficiency for the Dow Jones Industrial Average index. However, stock market returns are considered to be random. It is suggested that investors are incapable of constantly outperforming the marke

Seminar paper from the year 2011 in the subject Business economics - Investment and Finance, grade: 1,0, University of Hull, course: Current Issues Financial Management, language: English, abstract: The study examines and critical reviews the literature for the different implications based on the three levels of the Efficient Market Hypothesis for investors and company managers. If the weak form of the EMH holds, the technical analyse is useless, but ninety percent of traders in London are using it. If the semi-strong-form holds the fundamental analysis, study of published accounts, search for undervalued companies are useless and investors should be focus on diversification and avoiding of transaction costs. Furthermore the semi-strong form would imply for managers, that accounting disclosure to deceived shareholders is useless, the company market value is the best indicator for the company value and management decisions, the company does not need specialists for the timing of issues and there are no opportunities for a cheap acquisition of another company. At least if the strong-form of the EMH holds, it would imply that even with insider information it would not be possible to get above average returns. The literature shows, that the studies of EMH have made an important contribution to our understanding of the security market. It also shows that in some cases scientific results do not strong influence the behaviour of manager and investors in the "real world".

Seminar paper from the year 2010 in the subject Business economics - Investment and Finance, grade: 1.0, University of Sunderland, language: English, abstract: The role and importance of capital markets and EMH Crisp plc has to attract investments from capital markets. A capital market is simply any market where a government or a company (usually a corporation) can raise money (capital) to fund their operations and long term (periods longer than a year) investment.[1] Usual, short-term funds can be founded on other markets (e.g., the money market). The capital market consists of the stock market (equity securities) and the bond market (debt). Bonds and stocks are two ways to generate capital of any company. New issues of bonds and stocks are placed on primary capital markets by way of underwriting among investors. All money, received during underwriting, goes to company (Crisp plc) for its investment purposes. And placed bonds and stocks are sold and bought among other investors or traders in the secondary capital markets (a securities exchange, over-the-counter, or elsewhere). The prices of securities (both bonds and stocks) on secondary markets are reflected «real» price of company. It is good benchmark for primary placements of additional issues of bonds and/or stocks (further extension of the company). Crisp plc is going to issue bond or stocks. It means that it attract money from primary markets. Here very important thing is true price of bonds and/or stocks of Crisp plc, i.e. price has to be interesting for investors and allows to attract maximum of money. As stated above, prices of securities on secondary markets are reflected «real» price of company from point of view of investors. Here the efficient-market hypothesis (EMH) plays very important role, because it is the tool of securities pricing of off-site investors (which are outside of the company). According to the efficient-market hypothesis (EMH), which was developed by Professor Eugene Fama, financial markets are «informationally efficient».[2] It means that prices on traded assets are «real» and already reflect all known information. Prices change to reflect new information (for example, new investment program of the company). Consequently, it is impossible to consistently outperform the market by using any information that the market already knows. Information or news in the EMH is defined as anything that may affect prices that is unknowable in the present and thus appears randomly in the future.

Thesis (M.A.) from the year 2004 in the subject Business economics - Investment and Finance, grade: 1 (A), University of Graz (Institute f r Industrial Economics), 99 entries in the bibliography, language: English, abstract: This Master Thesis gives an overview of the research into the efficient market hypothesis from its first days in the 1950s to the present. The discussion of theoretical models and concepts is being complemented by a review of relevant empirical evidence from international capital markets. The thesis is completed by a brief outlook on newer research venues, including models employing behavioural finance approaches.

The Efficient Market Hypothesis believes that it is impossible for an investor to outperform the market because all available information is already built into stock prices. However, some anomalies could persist in stock markets while some other anomalies could appear, disappear and re-appear again without any warning. A Special Issue on "Efficiency and Anomalies in Stock Markets" will be devoted to advancements in the theoretical development of market efficiency and anomaly in the Stock Market, as well as applications in Stock Market efficiency and anomalies.