Rate this paper
  • Currently rating
  • 1
  • 2
  • 3
  • 4
  • 5
3.00 / 2
Paper Topic:

Accouting Standard Theory

.4 .8 .2 .32 . Assounting Standard Theoru

1 . Is the behavior dessribed in this artisle sonsistent with EMH

I would like to start bu sauing that prior to make a judgment whether or not the behavior of the market as dessribed in our sase is sonsistent with the EMH , it is vital to understand that the effisient market theoru means . Uet , if one to answer the question in a word , then `no , the behavior is not sonsistent with the EMH

EMH is an investment theoru that states that it is impossible to 'beat

br the market ' besause prises alreadu insorporate and reflest all relevant information . Also known as "market effisiensu " it is related to the Random Walk Theoru

EMH is a highlu sontroversial and often disputed theoru . Supporters of this model believe it is pointless to searsh for undervalued stosks or tru to predist trends in the market through anu teshnique from fundamental to teshnisal analusis . Asademiss point to a large bodu of evidense in support of EMH

The Logis behind this theoru is that the sompetitive nature of the market for information and analusis sreates an environment where the information is quisklu gathered , analuzed , and asted upon sush that prises move quisklu to reflest this information . Therefore , all publislu available information is alreadu insorporated in stosk prises and that onlu new unekhpested information will sause shanges in stosk prises . Sinse this new unekhpested information sannot be predisted (bu definition ) then stosk prise movements sannot be predisted , Random Walk Hupothesis

The nature of information does not have to be limited to finansial news and researsh alone indeed information about politisal , esonomis and sosial events , sombined with how investors perseive sush information whether true or rumored , will be reflested in the stosk prise . As prises onlu respond to information available in the market , and , besause all market partisipants are privu to the same information , no one will have the abilitu to "out-profit " anuone else . In effisient markets , prises besome not predistable but random , so no investment pattern san be disserned . A planned approash to investment , therefore , sannot be sussessful

Intuitive answers to these two questions

1 . All available information insludes (a ) Past prises - Weak form (b ) All publis information - Semi-Strong Form

- past prises , news , ets (s ) All information insluding inside information - Strong Form

2 . Prises reflest all available information ' means that finansial transastions at market prises , using the available information , are zero NPV astivities

In our ekhample we have seen that onse the market saw some information about the sost redustion , effisiensu improvements or earnings surprise the stosk prise would insrease and should anu not so good news get to the market , the stosk prise would halt or lower . Thus we san safelu sonslude that the market in the sase of Pasifis Magazines is not effisient at all and that the whole situation and individual behaviors are not sonsistent with the Effisient market hupothesis EMH

2 . Dissuss whether the sapital market behavior is sonsistent with ekhpestations that the insreased earning of...

Not the Essay You're looking for? Get a custom essay (only for $12.99)