Essay Title: 

Efficiency of UK stock market indices: an internal performance comparison between FTSE 250 and FTSE AIM

March 24, 2016 | Author: | Posted in finance, mathematics and economics

To test for this , consistent upward or downward adjustments after the initial change must be looked for . If there are any such adjustments it would suggest that investors had interpreted the information in a biased fashion and hence in an inefficient manner

[ HYPERLINK “http /en .wikipedia .org /w /index .php ?title Efficient_market_hypothesis a ction edit section 4 ” \o “Edit section : Strong-form efficiency ” edit ]

Strong-form efficiency

Share prices reflect all information and no one can earn excess returns .If there are legal barriers to private information becoming public , as with [banner_entry_middle]

insider trading laws , strong-form efficiency is impossible , except in the case where the laws are universally ignored . Studies on the U .S stock market have shown that people do trade on inside information

To test for strong form efficiency , a market needs to exist where investors cannot consistently earn excess returns over a long period of time . Even though many HYPERLINK “http /en .wikipedia .org /wiki /Mutual_fund ” \o “Mutual fund ” fund managers have consistently beaten the market , this does not necessarily invalidate strong-form efficiency . We need to find out how many managers in fact do beat the market , how many match it , and how many underperform it . The results imply that performance relative to the market is more or less normally distributed , so that a certain percentage of managers can be expected to beat the market . Given that there are tens of thousand of fund managers worldwide , then having a few dozen star performers is perfectly consistent with statistical expectations

[ HYPERLINK “http /en .wikipedia .org /w /index .php ?title Efficient_market_hypothesis a ction edit section 5 ” \o “Edit section : Arguments concerning the validity of the hypothesis ” edit ]

Arguments concerning the validity of the hypothesis

Some observers dispute the notion that markets behave consistently with the efficient market hypothesis… [banner_entry_footer]

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