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"The empirical evidence in the literature supports the efficient market hypothesis". Discuss the validity of this statement.
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| Submitted: Tue Mar 16 2004
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"The empirical evidence in the literature supports the efficient market hypothesis". Discuss the validity of this statement. The Efficient Market Hypothesis (EMH) has been described as one of the cornerstones of modern financial economics. Fama first defined the term "efficient market" in financial literature in 1965 as one in which security prices fully reflect all available information. The market is efficient if the reaction of market prices to new information should be instant and impartial. Also, EMH is the idea that information is quickly and efficiently integrated into assets prices at any point in time, so that old information cannot be used to predict future price movements. Consequently, three versions of EMH are being distinguished depending on the level of available information. The "Weak-form" (Predictability) asserts that all past market prices and data are fully reflected in securities prices, so technical analysis is of no use. The "Semi-strong" (Event studies) form...
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