What are the implications of the efficient market hypothesis

Reference no: EM131943247

Question: The most basic definition of an efficient capital market is one in which the prices of securities reflect all available information. This definition forms the basis of the efficient market hypothesis, which asserts that financial markets are in fact efficient and incorporate all available information into the price of securities. As a result, investors should be able to earn no more than a normal rate of return; prices will adjust immediately in response to new information, thereby eliminating the opportunity for an abnormal return. For firms, the efficient market hypothesis implies that they should receive a fair price for the securities that they sell. It also implies that firms will be unable to deceive investors into paying more for securities than the present value of those securities.

For this week's discussion, you will assess the implications of the efficient markets hypothesis. In your response, address the following:

Do you believe that markets are efficient? If so, why? If not, why not?

What are the implications of the efficient market hypothesis for corporate managers?

Reference no: EM131943247

Questions Cloud

Expansion project-requires initial fixed asset investment : Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.94 million.

Analyze the data visualizations on the slides : Data visualizations can be used in many different ways. Analyze the data visualizations on the slides and within the speaker notes.

Describe the four functions of management : In your discussion this week, please describe the four functions of management and tell us which one of the four functions is the most difficult for you and why

The decision-making process prior to a project beginning : As a manager, you may have employees who are not enthusiastic about working on a team. This could be due to any number of reasons.

What are the implications of the efficient market hypothesis : The most basic definition of an efficient capital market is one in which the prices of securities reflect all available information.

Impact a number of employees : Your organization is planning a major organizational change that will impact a number of employees. Some departments will need additional employees

What is the average investment in accounts receivable : What is the average investment in accounts receivable as shown on the balance sheet? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567).

Net present value of the more attractive generator : What is the net present value of the more attractive generator?

Determine the southwest airlines strategic approach : Assess Southwest Airlines' strategic approach to human resource (HR) management. Determine how its strategy increases organizational effectiveness.

User Account

All Pages