Economics Essay Example | Topics and Well Written Essays - 1250 words - 17

Economics - Essay Examplest be unfeasible to break the overall banal exchange market through market timing or expert stock selection, and the only base to an investor for obtaining higher returns is by buying riskier investments.Efficient Market possibility is divided into three types. These are strong, cheat strong and weak. The weak Efficient Market Hypothesis theory says that prices on assets traded such as bonds, stocks, or property already display all past available information for public. The semi-strong Efficient Market Hypothesis states that prices in addition to reflecting publicly available past information also shows that prices constantly change to show new publicly available information. However, the strong Effective Market Hypothesis says that in addition to the to a higher place two types of information, prices also show insider information or hidden truths.Although Efficient Market Hypothesis is the hindquarters of the financial theory today, it is doubtful and highly uncertain. A sizable number of educational institutions are in favor of Efficient Market Hypothesis but an equivalent number of people are against it. For instance, rabbit warren Buffet, an investor, has been beating the market for quite a long time now which is almost impracticable harmonize to the theory of Efficient Market Hypothesis. Critics of the Efficient Market Hypothesis also draw our attention towards the situation of 1987 and many as such when the stock price of Jones Industrial Average (DJIA) came down by 20% in one day as proof that stock prices can diverge to a large extent from their fair market values. There is also proof against and for strong, semi-strong and weak Effective Market Hypothesis. In an answer to the critics, the advocates of Effective Market Hypothesis claim that market efficiency does not ascertain murder certainty about the future but it is a generalization of the financial market which may be false sometimes. However in practical, market is efficient for purposes of speculation for almost all