14-6a.- Efficient Markets

14-6a.- Efficient Markets - Ramesh Rao 1 FEx06 Efficient...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Ramesh Rao 1 FEx06 Efficient Capital Markets Ramesh Rao 2 FEx06 Organization 1. Meaning, Significance, and Broad Implications 2. Types of Market Efficiency 3. Evidence and Conclusions Ramesh Rao 3 FEx06 1. Meaning and Significance • Meaning? • Significance? Ramesh Rao 4 FEx06 The EMH and its Implications • The Efficient Market Hypothesis (EMH): “Stock Prices Fully Reflect Available Information” • Implications: – “Investors can only expect to obtain normal rates of return” – Firms should expect fair value for its securities Ramesh Rao 5 FEx06 2. Types of Market Efficiency • Weak Form: – “Security prices fully incorporate information in past stock prices” P t = P t-1 + Expected Return + Random Error Stock prices follow a random walk Implication: – Security prices cannot be estimated through “ technical analysis” Ramesh Rao 6 FEx06 Other Forms of Efficiency • “Semi-strong Form” – “Security prices incorporate all publicly available information,” -the meaning of “fundamental analysis” • “Strong Form” – “Prices reflect all information, both public and private” Ramesh Rao...
View Full Document

This note was uploaded on 01/15/2010 for the course FIN 357 taught by Professor Hadaway during the Fall '06 term at University of Texas.

Page1 / 15

14-6a.- Efficient Markets - Ramesh Rao 1 FEx06 Efficient...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online