imported>Doug Williamson |
imported>Doug Williamson |
| Line 1: |
Line 1: |
| (EMH).
| | 1. |
|
| |
|
| The hypothesis that markets operate efficiently; that assets are fairly priced by the market mechanism to incorporate available information.
| | ''Financial modelling''. |
|
| |
|
| There are three forms of potential efficiency: the weak form, the semi-strong form and the strong form.
| | Flexible, Accurate, Structured, Transparent. |
|
| |
|
| #The <u>weak form</u> states that past prices are no guide to future prices, so charting techniques cannot be used to make excess returns.
| | The key purposes of the FAST Modeling Standard. |
| #The <u>semi-strong form</u> states that prices react to public information so that any form of analysis using publicly available information cannot be successful in consistently generating excess returns.
| |
| #The <u>strong form</u> states that even insider information cannot generate consistent excess returns.
| |
|
| |
|
|
| |
|
| Important implications of the efficient market hypothesis for financial managers include:
| | 2. |
| * Keeping the financial markets well-informed.
| |
| * Taking market price movements seriously.
| |
| * Not attempting to 'fine tune' the timing of security issues.
| |
|
| |
|
| Also known as the Efficient markets hypothesis.
| | Federation Against Software Theft. |
| | |
| | |
| In practice, extreme market outturns occur more commonly than predicted by simple efficient markets theory.
| |
| | |
| As a consequence, the simplistic application of efficient markets theory to risk analysis will systematically:
| |
| * Overstate market stability, and
| |
| * Understate related market risks.
| |
|
| |
|
|
| |
|
| == See also == | | == See also == |
| * [[Asymmetry of information]] | | * [[FAST Modeling Standard]] |
| * [[Efficiency]] | | * [[Federation Against Software Theft]] |
| * [[Efficient market]]
| |
| * [[Fractal markets hypothesis]]
| |
| * [[Interest rate parity]]
| |
| * [[No free lunch]]
| |
| * [[Perfect competition]]
| |
| * [[Semi-strong market efficiency]]
| |
| * [[Strong form efficiency]]
| |
| * [[Weak form efficiency]]
| |
