1lecture06

1lecture06 -...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Open Yale Courses ECON 252: Financial Markets Lecture 6 - Efficient Markets vs. Excess Volatility << previous session | next session >> Overview: Several theories in finance relate to stock price analysis and prediction. The efficient markets hypothesis states that stock prices for publicly-traded companies reflect all available information. Prices adjust to new information instantaneously, so it is impossible to "beat the market." Furthermore, the random walk theory asserts that changes in stock prices arise only from unanticipated new information, and so it is impossible to predict the direction of stock prices. Using statistical tools, we can attempt to test the hypotheses and to predict future stock prices. These tests show that efficient markets theory is a half-truth: it is difficult but not
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/08/2012 for the course ECON 252 taught by Professor Robertshiller during the Spring '08 term at Yale.

Ask a homework question - tutors are online