What is the Efficient Market Hypothesis (EMH) and what are its implications for investors? The EMH states that financial markets are informationally efficient, meaning that asset prices fully reflect all available information. This theory suggests that it's impossible to consistently outperform the market through stock selection or market timing. The EMH is typically divided into three forms: weak, semi- strong, and strong. Each form makes progressively stronger claims about the efficiency of markets and the type of information reflected in prices. If the EMH holds true, what does this mean for active investment strategies? How does the EMH challenge the concept of value investing?
What is the Efficient Market Hypothesis (EMH) and what are its implications for investors? The EMH states that financial markets are informationally efficient, meaning that asset prices fully reflect all available information. This theory suggests that it's impossible to consistently outperform the market through stock selection or market timing. The EMH is typically divided into three forms: weak, semi- strong, and strong. Each form makes progressively stronger claims about the efficiency of markets and the type of information reflected in prices. If the EMH holds true, what does this mean for active investment strategies? How does the EMH challenge the concept of value investing?
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter25: Portfolio Theory And Asset Pricing Models
Section: Chapter Questions
Problem 8MC: You have been hired at the investment firm of Bowers & Noon. One of its clients doesn’t understand...
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