Choose any stock (your choice) from one of the US Stock exchanges and plot the monthly...

Choose any stock (your choice) from one of the US Stock exchanges and plot the monthly (beginning) prices of this stock for all of 2019, through Oct 1 of 2020. You should 22 data points. Briefly explain whether or not this stock would add credence to, or not, for the Efficient Markets Hypothesis (EMH). This is not a quantitative question, per se, but provide appropriate rationale to support your answer.

Solutions

Expert Solution

The stock chosen for the analysis is EBAY

At first we collect the financial data for the company in order to investigate into the Efficient market hypothesis for EBAY

If EHM theory hold true in case of semi strong or strong markets like US , it states that all the data in the publicly available domain and the recent news will be reflected in the share prices .

Also

The past pprice and the volume information will have no impact on the current share price of the company :

So the data obtained were as follows

	EBAY
Date	Price	Volume
01-01-2019	32.78165	343616600
01-02-2019	36.19133	210230900
01-03-2019	36.31688	252316300
01-04-2019	37.8912	211328500
01-05-2019	35.13369	176656800
01-06-2019	38.77495	194738300
01-07-2019	40.43393	176600700
01-08-2019	39.55045	147930100
01-09-2019	38.39713	138279000
01-10-2019	34.7229	161549500
01-11-2019	34.98887	148552500
01-12-2019	35.7095	163581500
01-01-2020	33.18778	199703900
01-02-2020	34.2558	308100100
01-03-2020	29.86296	368561100
01-04-2020	39.56891	284329500
01-05-2020	45.24149	227159400
01-06-2020	52.29537	289890200
01-07-2020	55.11702	228002500
01-08-2020	54.6185	156441200
01-09-2020	52.1	187530200
01-10-2020	55.83	86811600

If we calculate the Average Monthly return and Std dev we find that

Current data
Average Monthly return	40.58956
Std dev	7.910597

Where as based on the past data we see these data are

Average Monthly return	29.07709105
Std dev	7.83870108

So we cann see the past price and the volume information is difference from the current one hence not influencing it .

Hence EHM theory holds true for this Semi –strong to Strong US markets as the publicly available information and news can be seen impacting the stock prices of EBAY . So EHM Holds True

jeff jeffy answered 1 year ago

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