Analysis Of The Efficient Market Hypothesis

Analysis Of The Efficient Market Hypothesis The Efficient Market Hypothesis (EMH), one of the most prominent conjectures in finance, emerged in the 1950s due to early application of computers in analysis of time-series behavior of economic variables. A vast body of research literature on this problem has been produced since the first studies attributed to Kendall (1953). The first articles dealing with market efficiency generally were supportive of the idea that securities are priced rationally and stock prices reflect all available at the moment information. However, with the development of advanced econometric techniques and powerful computers a new breed of literature emerged: researchers started to produce evidence debunking the EMH. Nevertheless, despite significant success in finding anomalies which clash with the EMH this great idea has remained to be a hypothesis since neither supporters nor opponents could produce reliable enough evidence to finally confirm or reject it. This essay elaborates on the question of validi ty of the EMH and shows that there is no simple answer which could end the debate about market efficiency. There are three forms of the EMH that are usually tested by researchers: weak form, semi-strong form and strong form. The main difference between them is contained in the information which can be used to predict future price movements of the stock. The weak form of market efficiency states that past prices do not have any influence on the current prices. In other words, it is impossible to use past price information to predict future prices since all this information is already reflected in the prices. The semi-strong form of market efficiency takes into account, besides past information about prices, publicly available information, i.e. financial reports, public announcements etc. And finally, the strong-form of market efficiency states that all available information, including that of insiders, is reflected in prices and, therefore, cannot be useful in price forecasting. Thus, usually researchers specify which type of market efficiency they test as the methods used are different. F ama (1991) presents a slightly different categorization of tests of market efficiency: tests for return predictability, event studies and tests for private information. However, all these tests have one purpose to find out if that is possible to develop profitable strategies based on the different kind of information which could produce significant abnormal returns. If the answer to this question is yes then opponents of the EMH obtain additional advantage in the debate about the EMH. On the other hand, the results testifying to validity of the EMH are generally regarded as common and do not get significant public attention. Before proceeding to critical evaluation of the particular anomalies which are supposed to refute the EMH it can be useful to consider general shortcomings of the tests employed in these procedures. First of all, all tests of market efficiency are based on a particular model which is used to predict normal returns. This leads to the joint-hypothesis problem, i.e. it is impossible to determine whether the obtained results are due to real market inefficiency or just reflect poorly specified model for normal returns. Second, the data-mining problem is especially pronounced in the tests of market efficiency. In other words, for every reported profitable strategy there can be dozens of unprofitable strategies which were not reported due to the fact that they did not produce any sensational result. And finally, all theoretical findings should be tested practically in order to determine the real income which can be generated on the basis of theoretical strategies. Otherwise, even very profi table strategy can be an artifact due to factors that remained unaccounted during the research. The strong form of market efficiency has become the weakest form in terms of the number of its supporters. It is generally believed that insiders can use their information to earn significant profits from trading. Jaffe (1974) finds that insiders have information that is not reflected in the stock prices. Moreover, he documents that outsiders can profit from the publicly available information on insiders trading up to 8 months after this information was released to the general public. However, Seyhun (1986), while confirming that insiders can use inside information to make significant profits, does not confirm that outsiders can earn significant abnormal returns using publicly available information on insiders trading. He argues that Jaffe used misspecified model for normal returns. Another type of studies of the strong form of market efficiency tests whether professional portfolio managers have access to private information. First evidence (Jensen 1969) testifies to the strong form of market efficiency and suggests that managers do not have access to private information as returns to investors in funds in 1945-1964 turn out to be 1% below the market line. On the other hand, Ippolito (1989) states that during 1965-1984 mutual funds outperformed the market line by 0.83% on average every year. This evidence, however, is not confirmed by the tests of the performance of pension funds and endowment funds. More recent evidence (Malkiel 2003) shows that for the twenty years ending December 31, 2001, the average actively managed large capitalization mutual fund performed worse than Standard Poors 500 large cap index by 2% annually. Therefore, it is not clear whether the EMH hypothesis can be refuted with respect to the strong form of market efficiency as various tests demonstrate different answers to this question. Tests of the semi-strong form of market efficiency are accomplished by means of event studies. This type of studies gives the cleanest picture of market efficiency since if the event date can be clearly specified and new information has a significant effect on prices, the models of normal returns do not influence the result to the extent observed in other forms of market efficiency studies. The opponents of the EMH believe that stock prices may underreact to new events. Therefore, purchasing (selling) stock when good (bad) information arrives at the market may produce significant abnormal returns (Gregory 1997). For instance, it is widely documented that companies accomplishing an IPO experience short-term overshooting and long-term negative performance. Another example is negative performance of bidding companies and positive performance of target companies during the process of mergers and acquisitions. These patterns, arguably, can be used to generate abnormal returns. However, as Fama (1998) demonstrates, the apparent underreaction to events is as common as overreaction and post-event continuation of abnormal returns is as frequent as post-event reversals. He also shows that the methods, long-term anomalies measured, play an important role since latter tend to disappear if reasonable changes are introduced in the test. Therefore, most of the anomalies discovered by researchers can be attributed to chance. It turns out that these anomalies do not allow investors to earn significant abnormal returns. The studies of the weak form of market efficiency generally test the Random Walk (RW) hypothesis. According to this hypothesis, stock prices exhibit unpredictable behavior and the best estimate of tomorrows price is todays price of the stock. Early studies in this area showed that prices indeed followed the RW and even if it were possible to find some predictability in price paths it would not be possible to exploit it in order to earn abnormal returns. Discovered patterns explained just up to 2% of the total variation of returns not enough taking into account bid-ask spreads. More recent studies started to use other variables (dividends, earnings per share, term-structure variables) to explain variation in returns. However, even these studies obtained positive first-order autocorrelations of weekly returns at the level of 0.3 (Lo and MacKinlay 1988). Apparently, such low predictability power could not be used to make significant profits. Nevertheless, further research led to revela tion of a number of anomalies. For instance, so-called January effect referred to the situation of abnormally generous returns on stocks of small companies during the first few days of January. Unfortunately, when transaction costs were taken into account (which are substantially higher for small companies than for large corporations) it turned out that this effect could not be exploitable by ordinary investors. Moreover, the January effect was not pronounced every year. A number of other effects were discovered during the course of research. They, however, also were non-dependable and disappeared when transaction costs were accounted for. Overall, it turns out that the idea of the EMH is still alive in spite of numerous facts that could refute it. The absence of the reliable theoretical model which could explain variation in normal returns does not allow one to be sure about discovered anomalies. Moreover, even anomalies which are strongly pronounced disappear as more and more market participants find out about them. This fact testifies to validity of the EMH. This means that even when information is not reflected in prices at the particular moment, as time passes arbitrageurs use the opportunity to earn risk-free profits and gradually correct market. This correction may take a long time (as, for instance, the Internet-bubble of the 2000s) but eventually all prices come to their fair level.

Mlk and Bill Clinton Compasison Essay

Martin Luther King and William J. Clinton comparison essay Elizabeth Frame March 20, 2013 Ms. Johnson Period 1A William J. Clinton was a democratic president who administered the United States for two terms. During his terms the U. S. enjoyed more peace and economic well being than at any time throughout it's history. In 2000 he called for a great national initiative to end racial discrimination. Martin Luther King was an American clergyman, activist, and a leader in the African American Civil Rights movement. He believed in nonviolent civil disobedience because he was a Baptist minister.In 1955 he led the Montgomery Bus Boycott and he helped found the Southern Christian Leadership Conference in 1957. In 1962 King led an unsuccessful struggle against segregation in Albany, Georgia, also organizing a nonviolent protest in Birmingham, Alabama that attracted national attention because of the brutal response from the police. King also in 1963 helped to organize the March on Washington wh ere he delivered his â€Å"I Have a Dream† speech. In both the â€Å"I Have a Dream† speech and the â€Å"Remarks to the Convocation of the Church of God in Christ† delivered by Rev. Martin Luther King, and former president William J.Clinton, both talk about things that at their time were very important to many of the citizens of the United States. They both made reference to great Americans such as Abraham Lincoln, Reverend Jackson, and former president Clinton's speech he even speaks a lot about Reverend Martin Luther King. They both stood for what they believed in in their speeches. Each one of them used solid arguments to get their points across to their audiences. From each speech there are certain words or phrases that everyone knows the speech by. For example Reverend King's speech is remembered by the repetition of the phrase â€Å"I have a dream†¦ . Both speeches have historic context that will always be remembered, and taught to each generation s leep that struggles from the past are not forgotten. In Reverend King's speech he was speaking to the nation, all of the citizens or residents of the United States. Reverend Martin Luther King wanted to get the civil rights movement moving more and in a nonviolent way, so he used his opportunity to give a speech on the National Mall very intelligently and to his advantage. Reverend Martin Luther King delivered his â€Å"I Have a Dream† speech for many reasons.His main purpose was for people to realize the minority such as African Americans were not being treated fairly and they were not receiving the basic freedoms that as Americans they should have had. Although slavery was over African American people still were not free. His goal was to get across to the people and change what was going on in the everyday life of an African American citizen. He wanted the minority (African Americans) to have the same rights as the caucasian people. He wanted them to both be able to coexist in the same area without any type of discrimination towards each other. William J.Clinton's speech â€Å"Remarks to the Convocation of the Church of God in Christ† was addressed to the church but to the nation as well. The purpose of Clinton's speech was to stress the need for effective crime legislation. He used the opportunity to speak at the church where Reverend Martin Luther King his last sermon about freedom, in order to address issues of crime, violence, and family. He made his speech while launching his plans to make America safer for future generations. Just like Reverend King, former President Clinton was against violence and wanted nothing but the best for ALL of the citizens of the United States.

Vital Pieces of Good Essay Topics

Vital Pieces of Good Essay Topics Ok, I Think I Understand Good Essay Topics, Now Tell Me About Good Essay Topics! It's important to not forget that peaceful atmosphere plays an excellent role when you aim to present a thriving essay or another bit of creative writing. A superb conclusion should depart from your reader with the impression which you've convincingly answered the essay topic. At times the students have to compose an essay on the subject given by the author that's a wholly different case. The thesis statement is important as it's the one that is going to be followed in the entire essay. Don't forget that each statement you make in your essay has to be proved. The way to the best essay is by way of WritePaperFor.Me. Regardless of the totally free theme, it's the exact same work, in the same way as any other essay, which means no more freedom there. Our writers will be happy to assist you with any sort of paper. Every writer we employ has written a good deal of special papers linked to your subject. The New Fuss About Good Essay Topics When writing an essay you could first decide on an excellent category of things which you have better knowledge and comprehension. An extensive understanding of the item you wish to create a reference list about is needed. From the above mentioned guidelines on the topic find one that you will probably feel comfortable when writing on make certain you use the appropriate category when classifying your points. Just about everything can be split into categories, but not everything can offer the material for an intriguing essay. The selection of the topic not merely is contingent on its uniqueness but in addition on you. Therefore, the topic you select plays an important role. Freedom of choice is the capability to decide on a topic that you're well versed in. Therefore, before picking the topic to write decide the field on which you need to write. It's impossible not to shed the major point and logical stream of ideas without having a writing plan. Rarely the work on the research papers go smoothly with no confusion, you can come to a standstill sooner or later or feel tension on account of the time limitations set. It can be insufficient if you've got severe issues with writing. Very often it becomes tough to choose one particular topic either on account of the many ideas in the student's head or due to their complete absence. There are many things you'd better remember. What's more, individuals drink for assorted reasons. Seeing the entire picture allows building a good thesis, which ought to contain the topic and the way it's categorized. Ask different people for help if you are feeling tired to do that. Categories, essay topics might be divided into. Shorter essays may just require one characteristic, with a comprehensive analysis of the way that it can help to differentiate the many groups. Narrative essay topics Narrative essay is somewhat different from different types. You are able to observe that to have the ability to compose informative classification essays, you have to know the greatest and the worst in addition to the unknown but important representatives of your root idea. As soon as you have categories, make sure they fit into the exact same organizing principle. The categories have to be exhaustive. The categories you select for your essay should be totally separate. Where to Find Good Essay Topics The degree of vocabulary employed in the essay ought to be sufficient for the entire disclosure of the topic. If you choose to compose a paper on both of the government term paper topics the principal idea is to conduct appropriate research and just then compose the expression paper. To be able to put a distinctive theme and an excellent paper, you should opt for a superb topic. The teachers don't always assign the specific topic. To compose a superb and effectual essay, one ought to pick the topic correctly. You need to be very careful when choosing an essay topic. There are many essay types, and at times the topic itself is as crucial as the sort of the essay you're assigned. Locating good essay topics can occasionally be the toughest part of writing any paper.

P4 Explain strategies used in health and social care...

P4 Explain strategies used in health and social care environments to overcome barriers to effective communication and interpersonal interactions. Introduction Health and social care settings can present a variety of barriers to effective communication and interpersonal interaction. However these barriers and environmental factors can be overcome with the use of specific strategies targeting specific barriers. In this assignment, I am going to explain a number of these strategies aimed at improving the quality of communication in health and social care settings. A. Communication and interpersonal interaction possible strategies a. Staff training and assessment of needs Communicating is a skill that can be acquired with practice.†¦show more content†¦Therefore every care practitioner should endeavour to promote theses rights when dealing with services users and their relatives. Furthermore, it is crucial for service users to understand that any information they give will be with strict confidentiality. It is a legal requirement for health and social care services to keep personal data confidential. c. Defusing aggression, building relationships and appropriate verbal/non-verbal communication. In health and social care settings, aggression could often be the result of fear, frustration or stress; consequently resulting in barriers to effective communication. Therefore care practitioners should device strategies to overcome this barrier by dealing with aggressive behaviour appropriately. For example: - Staying calm when confronted to an aggressive situation (relaxed body posture, normal breathing, avoiding giving aggressive vibes which might inflate the situation) - Being respectful (displaying non-verbal language showing respect and listening actively to service user) - Establishing trust by making the other person feel valued. - Try solving the problem by giving the person time to calm down and responding calmly. Then open discussion to resolve the issue at hand. This will in turn build a relationship based on trust, mutual respect and understanding between the care worker or professional and the service user. By using appropriate verbal andShow MoreRelatedhealth science937 Words   |  4 Pages Health professionals require good communication skills in order to carry out their roles effectively. It is therefore important for those embarking on a career in health and social care that they gain knowledge and understanding of skills involved in communication. 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