Forums › ACCA Forums › ACCA FM Financial Management Forums › Market efficiency
- This topic has 5 replies, 5 voices, and was last updated 14 years ago by moshi.
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- May 7, 2010 at 12:58 am #43768
HI
can any one plz guide me about what iz efficient market hypothesis,types of efficiency and market paradoxMay 8, 2010 at 3:42 pm #60054AnonymousInactive- Topics: 7
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weak form efficcient – market incorporates only historic data
semi strong – incorporates both historic & public data
strong- incorporates historic, public, and inside dataM
May 16, 2010 at 10:45 pm #60055The capital market can operate at 3 different levels of efficiency in their speed and accuracy in re-pricing shares as new information becomes available.
Weak form
– Share prices slow to react to new information (e.g. newspapers)
– Share prices reflect all historical information including past share price movementsSemi-strong form
– Share price reacts as soon as the information is released (e.g. press release)
– Share prices reflect all publicly available information
– Professional investors can’t beat the market in the long-term unless they know something that the market doesn’t (e.g. Inside trading – This is illegal and distorts the share price, therefore doesn’t properly reflect the market)Strong form
– Share price reacts before info is released to the public (e.g. resignation)
– This is NOT inside trading
– Share prices reflect information held privately by the directorsA key investment decision should be guided by the share price if the stock market is at least semi-strong form efficient
May 17, 2010 at 4:36 am #60056AnonymousInactive- Topics: 0
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A key investment decision could not be guided by the share price in semi-strong form efficiency because the share price should have reflected all the publicly-available information. The share price will follow a random walk.
May 17, 2010 at 5:45 am #60057Note that I used to words “at least”. Semi-strong form efficiency not only reflects all publicly available information but all relevant information about past price movements.. Research in both the UK and the USA has suggested that market prices anticipate mergers several months before they are formally announced, and the conclusion drawn is that the stock markets in these countries do exhibit semi-strong efficiency.
May 19, 2010 at 9:31 pm #60058plz read the article market matters from acca website for more information
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