It helps to define and explain the terms upon which

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
This formula is the general expected return model. It helps to define and explain the terms upon which equilibrium expected returns are formed. Fair game comes into play a bit later with a few more variables such as market value and return at t+1. This is all useless without the proper market conditions and the assumption that equilibrium expected return could exist. Second, The Review looks at the Sub-martingale model. The difference between this method and the last is that the Sub-martingale method uses an assumption that
Image of page 1

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

View Full Document Right Arrow Icon
implies that some rules are based solely off of the set of “fully reflected” information. This is the key difference. Third, The Review examines the Random Walk model. This model makes the assumption that if the current prices of a security “fully reflect” available information, then the successive price changes are independent. More over, The Review discusses the general market conditions needed to attain an efficient market. These conditions are as follows: “There are no transactions costs in trading securities” “all available information is costlessly available to all market participants” “all agree on the implications of current information for the current price and distributions of future prices of each security” In a market such as this one, the current price of a security would obviously "fully reflect" all available information and the market would be efficient. The Review covers various tests from “weak form” to “strong form”. After various formulae, appendices, and calculations, the result is that the efficient markets model is one that can exist. “In short, the evidence in support of the efficient markets model is extensive, and (somewhat uniquely in economics) contradictory evidence is sparse.”
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern