Week 11 - Efficient Market Hypothesis Flashcards
(6 cards)
1
Q
Who developed the Efficient Market Hypothesis (EMH)?
A
Eugene Fama in the 1960s
2
Q
How does an efficient market arise?
A
Due to a large number of traders on the markets and traders’ motivation and ability to seek out opportunities to make money
3
Q
So the price of a security, at any time, is…
A
A very good estimate of its value
4
Q
Where is the more likely to be mis-pricing?
A
Where a security is not traded in great volumes
5
Q
What does market efficiency decide?
A
Whether you can make abnormal profits or not
6
Q
What are the three forms of market effiency?
A
- weak-form
- semi-strong
- strong
