Financial Market Efficiency: How to Achieve

Barun kumar Jha, Shitika *

Abstract


An important debate among stock market investors is whether the market is efficient - that is, whether it reflects all the information made available to market participants at any given time. The efficient market hypothesis (EMH) maintains that all stocks are perfectly priced according to their inherent investment properties, the knowledge of which all market participants possess equally. Market efficiency was developed in 1970 by Economist Eugene Fama whose theory efficient market hypothesis (EMH), stated that it is not possible for an investor to outperform the market because all available information is already built into all stock prices. Investors who agree with this statement tend to buy index funds that track overall market performance. The theory involves defining an efficient market as one in which trading on available information fails to provide an abnormal profit. A market can be deemed to be efficient, therefore, only if we posit a model for returns. From this point on, tests of market efficiency become joint tests of market behaviour and models of asset pricing. So it is essential to study the efficiency of financial markets. In this paper levels, types and conditions of market efficiency are given.


Keywords


Financial market, Efficiency, market performance

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