Question

Montier and Malkiel aren't big believers in EMH. Regarding EMH, What do you think?

Answer 1

As per Efficient Market Hypothesis , the share prices reflect all information & consistent alpha generation is impossible .According to the EMH , shares are trading at fair value on exchanges making it impossible for investors to purchase

undervalued stocks or sell stocks for inflated prices .The only way an investor can obtain higher returns is by purchasing riskier investment .

there is an exception to the rule as Warren Buffet has conistently beaten the mark

There are 3 types of efficient market hypothesis :

i) Weak EMH : Presupposes that all the information from the past is already reflected in the stock' s price .

According to the weak EMH theory , Fundamental & technical analysis will be inefficient in a long run .

ii) Semi - Strong EMH : Suggest that new information is priced into stocks

iii) Strong EMH : any information private or public , is priced into stocks investors won't gain any advantage over

the market in general .

As soon as new information comes into the market , it is immediately reflected in stock prices & thus neither technical nor fundamental analysis can generate excess returns . Thus efficient market hypothesis remains valid