Declaration of originality

Download .pdf, .docx, .epub, .txt
Did you like this example?

Declaration of originality



The capital market efficiency is one of the most explored areas of interest in finance. Capital markets are believed to be informationally efficient. Market efficiency is a term, which is used to define the relation between share price and available information in the capital market.

Don’t waste time! Our writers will create an original "Declaration of originality" essay for you whith a 15% discount.

Create order

The market efficiency concept had been expected hopefully by Bachelier in 1990 in his dissertation. But this concept was brought in the literature of financial economics by Fama. Fama(1970 and 1991) defines market efficiency and on the basis of efficiency categorized it into three forms:

Ø The Weak Form: in this form current prices completely speculate all information held in historical prices, which means that no investor can prepare a trading pattern based on past price figures to earn trading profit.

Ø The Semi-Strong Form: a market is said to be semi strong efficient if that market is efficient enough to for prices to reflect all publically available information.

Ø The Strong Form: a market is having a strong form if current prices reflect all public as well as non-public information.

There are strong empirical evidences have been found by researchers which defend Efficient Market Hypothesis (EMH) and proof that while reacting on a revealing of a new information , no investor can gain abnormal returns. This is grounded on the assumption that disclosure of any new information is accessible to all investors equally and comprised into stock prices without any delay.

Three main assumptions of Efficient Market Hypothesis are:

  1. All investors have cost-less access to currently available information about the future.
  2. They are good analysts; and
  3. They pay close attention to the market process and adjust their holdings appropriately.

Complying with Fama (1970), there were a so many studies took to test Efficient Market Hypothesis and these tests shown the random behaviour of stock prices and also shown that information of past stock prices can’t predict the future prices.

On the other hand, despite of strong proofs defending the efficient market mechanism, there are some cases seen, in past, when these price information helps the investors to gain abnormal returns by showing some patterns in stock price market. Numbers of studies have been persuaded to testify that inefficiency in markets does exist. Some researches prove that stock prices shows kind of anomalous behaviour, which appears to be incompatible to Efficient Market Hypothesis. These empirical studies and researches highlighting various anomalies, related to capital market efficiency, and keyed out some parameters as

  • the low P/E effect
  • low-priced stocks
  • the small firm and neglected firm effects
  • market over-reaction and under-reaction
  • the monthly effect
  • day of the week effect
  • the continuity of technical analysis.

Do you want to see the Full Version?

View full version

Having doubts about how to write your paper correctly?

Our editors will help you fix any mistakes and get an A+!

Get started
Leave your email and we will send a sample to you.
Thank you!

We will send an essay sample to you in 2 Hours. If you need help faster you can always use our custom writing service.

Get help with my paper
Sorry, but copying text is forbidden on this website. You can leave an email and we will send it to you.