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428_lecture2_mktefficient_stu

428_lecture2_mktefficient_stu - Market Efficiency AEM 428...

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Market Efficiency AEM 428 Manny Dong Some materials from Smart et al.
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Inauguration Day (1/20/2009) Market Index Value Change Change% Dow 7949.09 -332.13 -4.01 Nasdaq 1440.86 -88.47 -5.78 SP500 805.22 -44.9 -5.28 IS Market Efficient?
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Inauguration Day (1/20/2009) Traders on the floor of the New York Stock Exchange paused at times to watch the inauguration ceremony and Obama's remarks, but the transition of power didn't erase investors' concerns about the struggling economy.
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Outline Market Efficiency: A debate of Malkiel and Shleifer 3 Forms of Market Efficiency and Evidence
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Market Efficiency Is market efficient? If it is, doesn’t price already reflect what our valuation model calculates? What if the risks are not taken into account using the traditional valuation technique?
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For Against Market Efficiency
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Market Efficiency Malkiel FOR
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Other arguments
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The main point of the market efficiency If it’s so easy to exploit market efficiency, why are the actively managed funds being beaten by index fund?
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Market Inefficiency Shleifer
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Market Inefficiency Shleifer
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Efficient Markets In an efficient market, prices rapidly incorporate all relevant information. The “Efficient Markets Hypothesis” (EMH) was first  formally proposed in 1970s by Eugene Fama. What are the three forms of market efficiency?   Financial markets are much larger, more competitive, more  transparent, more homogeneous than product markets. Much harder to create value through financial activities
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Definition by Fama (1976): An efficient capital market is a market that is efficient in processing information. The prices of securities observed at any time are based on ‘correct’ evaluations of all information available at that time. In an efficient market, prices ‘fully reflect’ available information.”
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Three Forms Of Market Efficiency   Weak Form Financial asset (stock) prices incorporate  all  historical information  into current prices. Past stock price changes cannot help you  predict future price changes.   Semi-strong  Form Stock prices incorporate  all publicly available   information (historical and current).
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