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    Efficient Market Hypothesis

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    How would you respond to the following comments?

    a. "Efficient market, my eye! I know lots of investors who do crazy things."

    b. "Efficient market? Balderdash! I know at least a dozen people who have made a bundle in the stock market."

    c. "The trouble with the efficient market theory is that it ignores investor's psychology."

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    https://brainmass.com/business/finance/efficient-market-hypothesis-59149

    Solution Preview

    "Efficient market, my eye! I know lots of investors who do crazy things. "Efficient market? Balderdash! I know at least a dozen people who have made a bundle in the stock market."

    This issue relates to the Efficient Market Hypothesis.
    It states that at any given time, security prices fully reflect all available information.In other words, in an efficient market at any point in time the actual price of a security will be a good estimate of its intrinsic value.
    There are three forms of the efficient market hypothesis

    1. The "Weak" form states that all past market prices and data are fully reflected in securities prices. In other words, technical analysis is of no use.
    2. The "Semistrong" form asserts that all publicly available information is fully reflected in securities prices. In other words, ...

    Solution Summary

    This discusses the efficient market hypothesis

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