Question

a. The concept of “efficient market hypothesis” has attracted a lot of debate and controversy in modern finance. As a student of finance, what critical issues would you say you have learnt about market efficiency using capital market history as your reference point?

Answer 1

As per my understanding the Markets are not Fully efficient the information is the power now a days and there are people who have information before any other people knows about it. There are several forms of market efficiency the fort is weak form efficient that means you can predict the future of the market by just analysing the past trends but it has been proved by research that markets are not weakly efficient that means it is not necessary that history will repeat this form of efficiency is more focused on the technical analysis but research has proved it is not useful. Another form of market efficiency is the semi-strong form efficiency that means the stock prices are moving whenever the new information is entered in to the market and there are few people who have such insider information and they can earn lots money out of information. And research has proved that there are few people who have important information about the events occurring in the company who can make high profit from the prior avaibility of such information. In this form of efficiency the data and information is the king someone who has important information about any company in the market can make lots of money and many cases of insider trading has proved this thing that there are few people who have prior excess to such information that means markets are bit predictable and does not follow the absolute random walk. Last form of market efficiency is the strong form market efficiency that means the markets not predictable at all. There is no one who had prior access to the information and market is following pure random walk but research has proved that such form of efficiency is not practical.

I hope my efforts will be fruitful to you...?