Critically appraise the relevance of Efficient Market Hypothesis (EMH) in the light of the advancements in...

Critically appraise the relevance of Efficient Market Hypothesis (EMH) in the light of the advancements in the field of Behavioral Finance.

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Expert Solution

Efficient Market Hypothesis- This theory says that it is not possible to beat the stock market. This is a psychological theory. This theory tells that stock market is very risky, volatile and uncertain so no expert theory works accurately. None of the stock market experts is 100% correct and sure about his research.

One big news is enough to bring the market down or up. This theory says that the stock market is not efficient. This theory says that an investor can make money by investing into risky stocks as there is more return with greater risk. Stocks are traded on fair value, some stocks are undervalued, if investors buy undervalued stocks with good fundamentals, they make money. This theory says that investors get the average or above average return but sometimes they cannot beat the benchmark.

This theory is a part of Behavioral Finance. Behavioral Finance gives the psychological theories of stock market. Investors' sentiments play a great role in stock market.

jeff jeffy answered 1 year ago

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