Market Efficiency
Market Efficiency Extended Essay
In this extended essay I will address a number of key issues in relation to market efficiency. I will define market efficiency and describe the three different forms of market efficiency which consist of; weak-form efficiency, semi-strong form and strong-form efficiency. I will also outline the characteristics of market efficiency. I will then define what a mutual fund is and compare and contrast an open-ended mutual and a closed-ended mutual fund. I will also then give my opinion on why I don’t think that mutual funds consistently out-perform the market.
Market efficiency was developed in 1970 by economist Eugene Fama. He came up with the theory efficient market hypothesis which states that it is not possible for an investor to outperform the market because all available information is already built into all stock prices. Market efficiency is basically the degree to which stock prices reflect all the available and relevant information.
A perfectly efficient market means that the prices reflect all information knowable and relevant. A perfectly efficient market means that there are no undervalued or overvalued securities. It doesn’t matter what the pricing structure of the market is, the market is priced perfectly in terms of that structure.
An efficient market is defined by available and accurate information about the securities and their prices. The efficient market hypothesis is based on the idea that every investor has all of the information about the securities available, the price demand as well as all of the other information which can be regarded as relevant. This relevant information may include past market behaviour or the performance of the particular company who are issuing the stock. The idea of an efficient market is that the more efficient it is then the more informed the decisions are of
In this extended essay I will address a number of key issues in relation to market efficiency. I will define market efficiency and describe the three different forms of market efficiency which consist of; weak-form efficiency, semi-strong form and strong-form efficiency. I will also outline the characteristics of market efficiency. I will then define what a mutual fund is and compare and contrast an open-ended mutual and a closed-ended mutual fund. I will also then give my opinion on why I don’t think that mutual funds consistently out-perform the market.
Market efficiency was developed in 1970 by economist Eugene Fama. He came up with the theory efficient market hypothesis which states that it is not possible for an investor to outperform the market because all available information is already built into all stock prices. Market efficiency is basically the degree to which stock prices reflect all the available and relevant information.
A perfectly efficient market means that the prices reflect all information knowable and relevant. A perfectly efficient market means that there are no undervalued or overvalued securities. It doesn’t matter what the pricing structure of the market is, the market is priced perfectly in terms of that structure.
An efficient market is defined by available and accurate information about the securities and their prices. The efficient market hypothesis is based on the idea that every investor has all of the information about the securities available, the price demand as well as all of the other information which can be regarded as relevant. This relevant information may include past market behaviour or the performance of the particular company who are issuing the stock. The idea of an efficient market is that the more efficient it is then the more informed the decisions are of
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