Discuss The Concepts of Market Efficiency and Evidence For and Against It

Requirements:The answer should be around 1200-1400 words, use essay structure(introduction+body paragraphs+conclusion)

There are some ways to answer the forms of Market Efficiency and evidence against it:

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EMH(Efficiency Hypothesis market): in an efficient market a security’s price fully reflects all available information.

The weak form(i.e. random walk theory): prices reflect all the information in past prices(all historical information)

 

 

The semi-strong form: prices reflect all publicly available information

The Strong Form: Prices reflect all information( both public and private)

-Small- firm effect:small firms have abnormally high returns

-Price Earnings(PE) ratio effect, book to market, etc

-January effect:high returns in January

-Market over-reaction

-New information is not always immediately incorporated into stock prices.

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