Study of Efficient Market Hypothesis 04012 Essay

Study of Efficient Market Hypothesis 04012 - Essay Examplens that the bubbles in termss of assets are not possible nor does EMH deny that behavioural and environmental features ceasenot have deep influences on the infallible risk premiums and rates of returns (Timmermann and Granger, 2004).EMH declares that shares are constantly traded at their reasonable value, therefore making it impracticable for the investors to obtain the undervalued shares or sell shares for overstated or inflated prices (Borges, 2010). According to this, it may be impossible for the investors to master the entire securities industry through market timing or expert share selection. So, the only room for the investor to receive higher or advanced returns is through buying riskier investments. There are three forms of energy i.e. weak-form, strong and semi-strong form of competency (Morningstar, 2015). In the efficiency of weak-form, it is not possible to predict the future price by analysing the past pr ices and the surplus returns cannot be received by employing the investment strategies which is based on the diachronic data (Gupta and Basu, 2011 Moustafa, 2004). In the semi-strong efficiency, stock prices are adjusted to the publicly accessible new information (Ma, 2004). However, the good or fundamental analyses are not able to consistently produce surplus returns. In the efficiency of strong-form, share prices reveal all information, private and public and no individual or company can earn surplus returns (Chau and Vayanos, 2008).The most influential argument against EMH is that the securities markets have frequently experienced excessive bubbles. When the market bubble exploded, internet associated stocks lost almost 90% of their value. The related mispricing of securities which are mortgage-backed had excessive consequences for the financial institutions as well as for the economy of entire world. Critics have deemed these incidents to be evident cases of the market ineffic iency. The continuation of bubbles in the prices of assets is