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Published On:Wednesday, 4 January 2012
Posted by Muhammad Atif Saeed

Market Efficiency

The degree to which stock prices reflect all available, relevant information. Market efficiency was developed in 1970 by Economist Eugene Fama who's theory efficient market hypothesis (EMH), stated that it is not possible for an investor to outperform the market because all available information is already built into all stock prices. Investors who agree with this statement tend to buy index funds that track overall market performance.

Explanation:
Investors and academics have a wide range of viewpoints on how efficient the market actually is, as reflected in the strong, semi-strong and weak versions of the EMH. At the other end of the spectrum from Fama and his followers are the value investors, who believe that stocks can become undervalued, or priced below what they are actually worth. Successful value investors make their money by purchasing stocks when they are undervalued and selling them when their price rises to meet or exceed their intrinsic worth.

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Posted by Muhammad Atif Saeed on 02:15. Filed under , . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response

By Muhammad Atif Saeed on 02:15. Filed under , . Follow any responses to the RSS 2.0. Leave a response

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I am doing ACMA from Institute of Cost and Management Accountants Pakistan (Islamabad). Computer and Accounting are my favorite subjects contact Information: +923347787272 atifsaeedicmap@gmail.com atifsaeed_icmap@hotmail.com

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