market efficiency and capitalisation
Module 10: (A) Market Efficiency; (B) Capitalization Changes; (C) TSIR
Learning Objectives
On completing this module students should be able to:
• Understand the concept of market efficiency
• Distinguish between different types of market efficiency
• Understand how to test for market efficiency and know the trends in the evidence on market behaviour
• Understand the current position on the various “anomalies” un covered by the research
• Explain the impact of capitalisation changes on the value of equity and on the share price.
Required
Reading
Textbook:
Peirson, Brown, Easton, Howard and Pinder, Business Finance, 11th Edition, McGraw-Hill, 2012.
This module covers material from several chapters of your text PBEHP. The majority comes from Chapter 16. You covered some of the material in the early parts of this unit here we will cover the whole chapter in depth. TSIR was introduced in Module Three.
Chapter Section Study Level Comment
16 16.1 Thorough 16.2 Thorough 16.3 Thorough 16.4 Thorough 16.5 Thorough 16.6 Thorough 16.7 Thorough
TSIR 4.6 to 4.8 Thorough See Module Three
Splits 9.9.1 & 2 Thorough Including reverse splits or consolidations
Dividends 11.1.1 Thorough Dividend drop-off
Bonus Issues 9.9.1 & 2 Thorough
Rights Issues 9.6.1 Thorough
Buybacks 11.1.4 Thorough Also called share repurchases
Basic: Read lightly and be aware of the issues, problems or suggested solutions.
Moderate: Read and be able to replicate and perform examples set in this module.
Thorough: Read and study thoroughly.
For a contrary view on market efficiency, see Robert A. Haugen, The New Finance, Overreaction, Complexity and Uniqueness, 3rd Edition, Pearson Prentice Hall, 2004. Topic 10.1: Introduction - The Efficient Market Hypothesis [A]
An Efficient Market Defined
The primary role of the capital market is the allocation of ownership of the economy's capital stock. The ideal is a market in which prices
Learning Objectives
On completing this module students should be able to:
• Understand the concept of market efficiency
• Distinguish between different types of market efficiency
• Understand how to test for market efficiency and know the trends in the evidence on market behaviour
• Understand the current position on the various “anomalies” un covered by the research
• Explain the impact of capitalisation changes on the value of equity and on the share price.
Required
Reading
Textbook:
Peirson, Brown, Easton, Howard and Pinder, Business Finance, 11th Edition, McGraw-Hill, 2012.
This module covers material from several chapters of your text PBEHP. The majority comes from Chapter 16. You covered some of the material in the early parts of this unit here we will cover the whole chapter in depth. TSIR was introduced in Module Three.
Chapter Section Study Level Comment
16 16.1 Thorough 16.2 Thorough 16.3 Thorough 16.4 Thorough 16.5 Thorough 16.6 Thorough 16.7 Thorough
TSIR 4.6 to 4.8 Thorough See Module Three
Splits 9.9.1 & 2 Thorough Including reverse splits or consolidations
Dividends 11.1.1 Thorough Dividend drop-off
Bonus Issues 9.9.1 & 2 Thorough
Rights Issues 9.6.1 Thorough
Buybacks 11.1.4 Thorough Also called share repurchases
Basic: Read lightly and be aware of the issues, problems or suggested solutions.
Moderate: Read and be able to replicate and perform examples set in this module.
Thorough: Read and study thoroughly.
For a contrary view on market efficiency, see Robert A. Haugen, The New Finance, Overreaction, Complexity and Uniqueness, 3rd Edition, Pearson Prentice Hall, 2004. Topic 10.1: Introduction - The Efficient Market Hypothesis [A]
An Efficient Market Defined
The primary role of the capital market is the allocation of ownership of the economy's capital stock. The ideal is a market in which prices