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Behavioural Fin.allija

The document discusses market efficiency, defining it as a market where prices reflect all available information and adjust quickly to new data. It introduces the Efficient Market Hypothesis (EMH), developed by Eugene Fama, which posits that asset prices incorporate all information, making it impossible to achieve consistent excess returns through analysis. The document also outlines three forms of market efficiency: weak, semi-strong, and strong, each reflecting varying levels of information incorporation into market prices.

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Pramod P
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5 views

Behavioural Fin.allija

The document discusses market efficiency, defining it as a market where prices reflect all available information and adjust quickly to new data. It introduces the Efficient Market Hypothesis (EMH), developed by Eugene Fama, which posits that asset prices incorporate all information, making it impossible to achieve consistent excess returns through analysis. The document also outlines three forms of market efficiency: weak, semi-strong, and strong, each reflecting varying levels of information incorporation into market prices.

Uploaded by

Pramod P
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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MARKET

EFFICIENCY AND
EFFICIENT
MARKET
HYPOTHESIS
PRESENTED BY
ALLIJA S L
01 WHAT IS MARKET
EFFICIENCY
TABLE OF EFFICIENT MARKET
CONTENTS 02 HYPOTHESIS

FORMS OF MARKET
03 EFFICIENCY
Efficient Market : Definition

● An efficient market is a place where the market prices of


financial instruments like stocks reflect all information
that is available. It also adjusts instantaneously to any
new information that may be disclosed
● A truly efficient market eliminates the possibility of
beating the market, because any information available
to any trader is already incorporated into the market
price.
EFFICIENT MARKET HYPOTHESIS
❏ The Efficient Market Hypothesis (EMH) is a hypothesis in financial
economics that states the asset prices reflect all available information.
In other words, the market quickly and correctly adjusts to new
information. Therefore, in an efficient market, prices immediately and
fully reflect available information.
❏ The theory was developed in 1970 by economist, Eugene Fama. He
later won the Nobel Prize for his efforts.
❏ This hypothesis states that the capital market is efficient in processing
information.
❏ Therefore it holds the view that in an efficient market new information
is processed and evaluated as it arrives and prices instantaneously
adjust new and correct levels.
❏ Consequently an investor cannot consistently earn excess returns by
undertaking fundamental and technical analysis.
Forms of market efficiency
Forms of efficient market

Weak form :
This form of market efficiency theory suggests
that current market prices of securities reflect
their previous or historical prices.
Forms of efficient market

Semi-strong form :
In a semi-strong variation of an efficient
market, the current prices of securities
represent all information that is publicly
available
Forms of efficient market

Strong form :
This form of market efficiency theory states
that market prices of securities reflect public
and private information both. Consequently,
investors will not be able to beat the market by
trading on any private information since all
such information will already be factored into
the market
THANKS!

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