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The prices of stocks at any point should reflect, fully, all available information. We live in...

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Finance

The prices of stocks at any point should reflect, fully, allavailable information. We live in the internet era whereinformation is readily available. Investors react to informationand the price of stocks react accordingly. Write a paper about theforms of stock market efficiency and the tests of the efficientmarket hypothesis. Include in your discussion a comparison andcontrast between the Christian worldview and the secular worldviewabout the stewardship of money. 500 words minimum

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WHAT ISEFFICIENT MARKET HYPOTHESIS1 The efficientmarket hypothesis EMH is a theory infinancial economics that states that asset prices fully reflect allavailable information2 The efficientmarket hypothesis was developed by Eugene Famawho argued that stocks always trade at their fair value making itimpossible for investors to either purchase undervalued stocks orsell stocks for inflated prices3 The efficientmarket hypothesis states that financial marketsincorporate relevant information very quickly4 Eugene Fama developed a framework of market efficiency thatlaid out three forms of efficiencyWeak formSemistrong formStrong form5 Each form is defined with respect to the availableinformation that is reflected in prices Investors trading onavailable information that is not priced into the market would earnabnormal returns or excess riskadjusted returnsFORMS OF STOCKMARKET EFFICIENCYA WEAK FORM EFFICIENCY Also called as RANDOM WALKTHEORYMEANING1 In the weakform efficient market hypothesis all historicalprices of securities have already been reflected in the marketprices of securities2 In other words technicians those trading on analysis ofhistorical trading information should earn no abnormalreturns3 Research has shown that this is likely the case in developedmarkets but less developed markets may still offer the opportunityto profit from technical analysisDEFINITIONWeak form efficiency is an investment analysis theory thatstates future stock prices cannot be readily estimated by    See Answer
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