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9 Cards in this Set
- Front
- Back
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Efficient capital market
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Current price of a security fully reflects al information currently available to the market
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Efficient capital market assumptions
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1. Large number of profit maximizing investors
2. New info comes to market randomly and independent of one another 3. Investors adjust estimate of security value to reflect new info rapidly 4. Expected returns implicitly include risk in the price of security |
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Weak form efficient market
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Current stock prices fully reflect all currently available market info. Technicial analysis cannot achieve abnormal returns. Empiriacal evidence supports this
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Semi-strong form efficient market
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Security prices fully reflect all new public info (market and nonmarket). Thereofore, neither technical or fundamental analysis can achieve abnormal returns. Test offer mixed resluts.
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Strong form efficient market
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Stock price fully reflects all public and private informations. No group of investors has access to information private or public that will allow them to consistantly earn abnormal returns (assumes perfect markets, no insider information). Tests support this conclusion with the exception of insider trading and specialist trading.
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Weak form tests
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Statistical tests for independence (runs test and auto correlation)
Trading rules tests (filter rules) |
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Semi strong form tests
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Time series tests
Cross sectional tests Event studies |
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Strong form tests
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Stong form tests test the following groups...
Insider trading Exchange specialists Security analysts Professional money managers |
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Market anomolies
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All anomolies effect semistrong EMH
Earnings suprises Calandar studies (january anomoly weekend effect) P/E ratio Size effect Neglected firms BV/MV ratios |
