Market Efficiency

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MarketEfficiency

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MarketEfficiency

Accordingto this theory, after money is put in stock markets, the main purposeis the generation of a return on the invested capital. Not only doinvestors try to be profitable and stay afloat in the market, butthey also want to beat it and outperform their previous performances(Chordia, Roll &amp Subrahmanyam, 2013, p.249-268). However, EugeneFama suggested in 1970 that the prices prevailing in the stock marketpredict the available information regarding the specific market ofstocks. Therefore, no one can boast of being able to predict stockmarket patterns as people work with information present to makesuggestions and adjustment to future activities and events. Thishypothesis, called the Efficiency Market Hypothesis, earned himtogether with Robert Shiller and Lars Peter Hansen a Nobel Prize.However, I do not agree with this suggestion.

Thetheory state that stock prices are not only influenced by economicand investment information, but also political and social inconjunction with how investors perceive the effect of thisinformation on the stock market. Therefore, it is difficult topredict prices because everyone has access to the same information(Kristoufek&amp Vosvrda, 2013, p.184-193). As a result, it is difficult for aplayer beat the market. To the contrary, businesspersons like WarrenBuffett have beaten the market by establishing investments whosestrategy focuses on stocks that are undervalued. It all comes down tothe elements of resources. Resources determine how extensive abusiness can afford to conduct researches, analyses and keep goodtrack of records (Kesan &amp Bashir, 2013, p.341). Predicting themarket is feasible with this information because in general theconsumer behavior remains normal, in that their patterns ofconsumption remain the same. There is an increased tendency forconsumers to spend during the holidays and festive seasons. Thathardly changes. There is no way performance can be random when peopleare actually beating the market and profiting from it.

References

Chordia,T., Roll, R., &amp Subrahmanyam, A. (2008). Liquidity and marketefficiency. Journal of Financial Economics, 87(2), 249-268.

Kesan,J. P., Hayes, C. M., &amp Bashir, M. N. (2013). Information Privacyand Data Control in Cloud Computing: Consumers, Privacy Preferences,and . Wash. &amp Lee L. Rev., 70, 341.

Kristoufek,L., &amp Vosvrda, M. (2013). Measuring capital market efficiency:Global and local correlations structure. Physica A: StatisticalMechanics and its Applications, 392(1), 184-193.

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