What Is the Efficient Market Hypothesis?
Fama (1970) defines an efficient market as one where prices always fully reflect available information.
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1.What does the efficient market hypothesis say?
Fama (1970) defines an efficient market as one where prices always fully reflect available information.
2.What does efficient mean in the video's illustration of good news at nine o'clock?
Within minutes the price moves and an hour later the news is inside the price; efficient means fast, not flawless.
3.Which information does the weak form contain?
Weak form: past prices; semi-strong: all public information; strong: even private information. Memory hook: past, public, private.
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Sources (5)
- Fama, E. F. (1970): Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance 25(2), 383-417
- Shiller, R. J. (1981): Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends? American Economic Review 71(3), 421-436
- Nobelpreis Wirtschaftswissenschaften 2013, Popular Information (Royal Swedish Academy of Sciences)
- Fama, E. F. und French, K. R. (2010): Luck versus Skill in the Cross-Section of Mutual Fund Returns. Journal of Finance 65(5), 1915-1947
- Eigene Rechnung / Modellannahme (synthetisches Nachrichtenbeispiel)
Education only. Not financial advice.