Efficient Market Hypothesis Assignment Example | Topics and Well Written Essays - 1000 words

Efficient Market Hypothesis - Assignment Example Among the foremost to apply digital computers to perform empirical research in the field of finance, Fama operationally defined the EMH by pointing structure on several information sets accessible to market players. The efficient-market hypothesis necessitates that the agents should expect rationally that on average the overall population is correct (although if no individual is) and each time new pertinent information comes out, the agents should update their anticipations appropriately. Moreover, agents are not needed to be rational. EMH permits that on facing novel information, some investors may under react while some, on the other hand may over react. But, they are necessitated by EMH to react in a random manner that follows standard normal distribution. So, the overall impact on market prices may not be constantly exploited to attain more than usual profit, particularly, while keeping into consideration the transaction costs (including spreads and commissions). Therefore, any i ndividual may be perceived to be incorrect regarding the market but, market, on the contrary, as a whole is considered to be always correct. Three levels of hypothesis The efficient market hypothesis can be commonly stated in three basic forms. These include weak-form, semi-strong form and strong form efficiency. Each of these provides distinct implications for the way market performs. Weak-Form Efficiency This form of EMH specifies that current prices of assets reflect past volume and price information. The information incorporated in the past series of a security’s prices is completely reflected in its present market price. It is called as weak because the market price is the most accessible information available to individuals and the utilization of technical analysis is forbidden by this form of EMH. Semi-Strong Form Efficiency This form submits that entire available information to the public is incorporated into the prices of asset. Thus the market price of that asset is a complete reflection of all information accessible to the public. This publicly known information includes the past prices as well as the data reported by the company in its financial statements, announcement along with economic and other factors. The Strong-Form Efficiency This form implies that along with the publicly available information, the insider or private information is also reflected in an asset’s market price. Thus, such a market restricts the inside organization members from gaining unusual returns. Thus, all forms of EMH restrict individuals from attaining unusual returns due to unavailability of information and inhibit the possibility of arbitrage or risk free profit (Fama, 1991). Firm’s pricing of debt and equity decisions and EMH The 2007-2012 financial disaster has contributed to renewed criticism and scrutiny of the efficient market hypothesis. It has been even dismissed as being an ineffective way to study the functioning of financial markets in reality by various economists and financial analysts. Critics have proposed that corporations and financial institutions have the

Summary and Insights on Selected Bible Passages Essay

Summary and Insights on Selected Bible Passages - Essay Example To begin with, the 2nd Book of Samuel is an account of significant events in David’s reign as King. In Chapter 5, he was proclaimed the anointed ruler by God. God hides when he conveys his messages to David. He uses Nathan, a prophet to be his messenger. Nathan relayed to David the messages of God sent in his dreams. One of the most significant events ever recorded in this Book is when God established his covenant with David by detailing His promises as follows:   Ã¢â‚¬Å"†¦I have cut you off all your enemies from before you. Now I will make your name great, like the names of the greatest men on earth. And I will provide a place for my people of Israel and will plant them so that they can have a home of their own and no longer be disturbed. The Lord declares to you that the Lord Himself will establish a house for you. When your days are over and you rest with your fathers, I will raise your offspring to succeed you, who will come from your own body, and I will establish his kingdom† (Holy Bible New International Version, 2 Sam 7: 9-12).   In other words, for winning God’s favor, David, as written in Chapter 7, received great fame, fortune and successes in all the endeavors he took including victories in all the battles he fought. At the onset, it was also disclosed that God requested David through Nathan to build a house of cedar for the Ark of the Covenant which was then housed in a tent.On Chapter 11, the dark side of King David was revealed.