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Efficient market hypothesis

• In general the hypothesis states that all relevant information is fully and immediately reflected in a security's market price thereby assuming that an investor will obtain an equilibrium rate of return. In other words, an investor should not expect to earn an abnormal return (above the market return) through either technical analysis or fundamental analysis. Three forms of efficient market hypothesis exist: weak form (stock prices reflect all information of past prices), semi-strong form (stock prices reflect all publicly available information) and strong form (stock prices reflect all relevant information including insider information).

• Theory describing the behaviour of an assumed perfect market in which securities are typically in equilibrium, security prices fully reflect all public information available and react swiftly to new information, and, since stocks are fairly priced, investors need not waste time looking for mispriced securities. A market that allocates funds to their most productive uses as a result of competition among wealth-maximizing investors that determines and publicizes prices that are believed to be close to their true value. An assumed perfect market in which there are many small investors, each having the same information and expectations with respect to securities; there are no restrictions on investment, no taxes, and no transaction costs; and all investors are rational, they view securities similarly, and they are risk-averse, preferring higher returns and lower risk.

 
 

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Competition
Efficient market
Expectations
Fundamental analysis
Insider information
Insider
Investor
Market return
Market
Prices
Rate of return
Return
Risk
Securities
Security
Technical analysis
Time
Transaction costs
Will
 
 Related Terms
 
Auction market
Bank market
Bear market
Black market
Breadth of a market
Brokered market
Bull market
Bulldog market
Buyer's market
Capital market
Capital market efficiency
Capital market imperfections view
Capital market line
Carrying charge market
Cash market
Common market
Common stock market
Complete capital market
Corner a market
Crossed market
Currencies and major foreign market hedge funds
Dealer market
Debt market
Depth of a market
Direct search market
Domestic market
Efficient capital market
Efficient diversification
Efficient frontier
Efficient market
Efficient portfolio
Efficient set
Either way market
Equilibrium market price of risk
Equity market
Eurocurrency loan market
Eurocurrency market
Euroequity market
European open market
Excess return on the market portfolio
Expectations hypothesis
Expectations hypothesis theories
External market
Fair market price
Fast market
Federal funds market
Federal open market committee
Financial market
Fixed income market
Flat market
Foreign banking market
Foreign bond market
Foreign equity market
Foreign market
Foreign market beta
Forward market
Fourth market
Futures market
Gray market
Index and option market
Inside market
Internal market
Internally efficient market
International equity market
International market
International monetary market
Inverted market
Liquidity preference hypothesis
Locked market
Make a market
Mark to market
Marked to market
Market
Market arbitrage
Market book ratio
Market cap or market capitalization
Market capitalization
Market capitalization rate
Market clearing
Market conversion price
Market cycle
Market efficiency hypotheses
Market if touched
Market impact costs
Market maker
Market maker spread
Market model
Market on close
Market on opening
Market order
Market overhang
Market portfolio
Market premium convertible securities
Market price of risk
Market prices
Market return
Market risk
Market risk return function
Market sectors
Market segmentation theory or preferred habitat theory
Market stabilization
Market surveillance
Market timer
Market timing
Market timing costs
Market to book ratio
Market value
Market value ratios
Market value weighted index
Market value weights
Marking to market
Markowitz efficient frontier
Markowitz efficient portfolio
Markowitz efficient set of portfolios
Matador market
Mean variance efficient portfolio
Money market
Money market center bank
Money market certificates
Money market demand account
Money market fund
Money market hedge
Money market mutual funds
Money market notes
National market
New issues market
Normal market
One sided one way market
One way market
Open market operation
Open market purchase operation
Open market share repurchases
Operationally efficient market
Otc market
Over the counter market
Over the counter otc market
Overreaction hypothesis
Perfect capital market
Perfect market view of capital structure
Perfect market view of dividend policy
Primary market
Ratio of exchange in market price
Real market
Rembrandt market
Samurai market
Secondary market
Security market line
Security market plane
Seller's market
Side of the market
Specific issues market
Spot market
Stock market
Tax efficient portfolios
Technical condition of a market
Thin market
Third market
Tight market
Two sided market
Two way market
Underlying market price
Upstairs market
Yankee market

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