Evaluate the evidence for and against the efficiency market

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Reference no: EM132288389

Assignment: Interpret Financial Market Efficiency

Instructions

Evaluate the evidence for and against the Efficiency Market Hypothesis. Take on the role of an expert in this area and create a Power Point Presentation to be given to a group of investors. Formulate and provide conclusions and recommendations for guiding these investors considering this market efficiency debate. Include in your presentation the role that can be played by financial stakeholders in effecting the efficiency of the market.

The required length of the PowerPoint Presentation option for this assignment is 12-15 slides (with a separate reference slide). Your presentation MUST include notes that contain 100-150 words per slide (this is your script). Be sure to include citations for quotations and paraphrases with references in APA format and style. Save the file as a PPT file with the correct course code information in the name.

Evidence and Implication of Market Efficiency

Statistical research has shown that to a close approximation stock prices seem to follow a random walk with no discernible predictable patterns that investors can exploit. Such findings are now taken to be evidence of market efficiency, that is, evidence that market prices reflect all currently available information. Only new information will move stock prices, and this information is equally likely to be good news or bad news.

Market participants distinguish among three forms of the efficient market hypothesis. The weak form asserts that all information to be derived from past trading data already is reflected in stock prices. The semi-strong form claims that all publicly available information is already reflected. The strong form, which generally is acknowledged to be extreme, asserts that all information, including insider information, is reflected in prices.

Technical analysis focuses on stock price patterns and on proxies for buy or sell pressure in the market. Fundamental analysis focuses on the determinants of the underlying value of the firm, such as current profitability and growth prospects. Because both types of analysis are based on public information, neither should generate excess profits if markets are operating efficiently.

1. Review the resources listed in the Books and Resources area below to prepare for this week's assignments.

2. Complete the following Spotlight on Skills if you need assistance with the tools used to complete your assignments.
Spotlight on Skills: Developing PowerPoint Presentations

To view the Spotlight on Skills: Developing a PowerPoint Presentation, go to the Course Resources module in the table of contents or click on the linked text.

Spotlight on Skills: How to Prepare an Engaging Lecture

To view the Spotlight on Skills, go to the Course Resources module in the table of contents and click on Spotlight on Skills.

Read:

Book: Investments

Bodie, Z., Kane, A., & Marcus, A. J. (2013). Investments New York, NY McGraw-Hill-Irwin.

Watch: Evidence And Implications Of Market Efficiency

Reference no: EM132288389

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