复旦大学：《投资学讲义》（英文版） Chapter 8 Market Efficiency

INVESTMENTS Fourth Edition Chapter 3 Market Efficienc

INVESTMENTS Fourth Edition Market Efficiency Efficiency Chapter 8 Chapter 8

INVESTMENTS Fourth Edition Efficient market Hypothesis (EMF a do security prices reflect information a Why look at market efficiency Implications for business and corporate finance Implications for investment

INVESTMENTS Fourth Edition „ Do security prices reflect information ? „ Why look at market efficiency - Implications for business and corporate finance - Implications for investment Efficient Market Hypothesis (EMH) Efficient Market Hypothesis (EMH)

INVESTMENTS Fourth Edition Rando walk and the emhi Random Walk- stock prices are random Actually submartingale Expected price is positive over time Positive trend and random about the trend

INVESTMENTS Fourth Edition „ Random Walk - stock prices are random - Actually submartingale ‹Expected price is positive over time ‹Positive trend and random about the trend Random Walk and the EMH Random Walk and the EMH

INVESTMENTS Fourth Edition Random Walk with positive trend Security Prices Time

INVESTMENTS Fourth Edition Random Walk with Positive Trend Random Walk with Positive Trend Security Prices Time

INVESTMENTS Fourth Edition Price changes Why are price changes random? Prices react to information Flow of information is random Therefore, price changes are random

INVESTMENTS Fourth Edition Why are price changes random? „ Prices react to information „ Flow of information is random „ Therefore, price changes are random Random Price Changes Random Price Changes

INVESTMENTS Fourth Edition EMH and competition a Stock prices fully and accurately reflect publicly available information Once information becomes available. market articipants analyze it Competition assures prices reflect information

INVESTMENTS Fourth Edition „ Stock prices fully and accurately reflect publicly available information „ Once information becomes available, market participants analyze it „ Competition assures prices reflect information EMH and Competition EMH and Competition

INVESTMENTS Fourth Edition Forms of the emh ■Weak ■Semi- strong a Strong

INVESTMENTS Fourth Edition „ Weak „ Semi-strong „ Strong Forms of the EMH Forms of the EMH

INVESTMENTS Fourth Edition T'ypes of market efficienc a The weak-form of efficiency: price accurately reflect all information that can be derived by examining market trading data such as past prices, trading volume, short Interest rate. etc The semistrong form of efficiency: prices accurately reflect all public available information, including past prices fundamental dat on the firm's product line, quality of management, balance sheet composition, patens held, earning forecasts, accounting practice, etc The strong form of efficiency: prices accurately reflect all information that is known by any one, including inside information

INVESTMENTS Fourth Edition Types of market efficiency Types of market efficiency „ The weak-form of efficiency: price accurately reflect all information that can be derived by examining market trading data such as past prices, trading volume, short interest rate, etc. „ The semistrong form of efficiency: prices accurately reflect all public available information, including past prices, fundamental dat on the firm’s product line, quality of management, balance sheet composition, patens held, earning forecasts, accounting practice, etc. „ The strong form of efficiency: prices accurately reflect all information that is known by any one, including inside information

INVESTMENTS Fourth Edition Some words about market efficieng An inefficiency ought to be an exploitable opportunity. If there is nothing investors can properly exploit in a systematic way, then it is very hard to say that information is not being properly incorporated into stock prices;- Richard roll a Financial markets are efficient because they dont allow investors to earn above-average returns without taking above-average risk---Burton malkiel a The efficient markets theory holds that the trading by investors in a free and competitive market drives security prices to the true fundamental values. The market can better assess what a stock or a bond is worth than any individual investor -.Andrei shleifer

INVESTMENTS Fourth Edition Some words about market efficiency Some words about market efficiency „ An inefficiency ought to be an exploitable opportunity. If there is nothing investors can properly exploit in a systematic way, then it is very hard to say that information is not being properly incorporated into stock prices;--- Richard Roll „ Financial markets are efficient because they don’t allow investors to earn above-average returns without taking above-average risk---Burton Malkiel „ The efficient markets theory holds that the trading by investors in a free and competitive market drives security prices to the true “fundamental” values. The market can better assess what a stock or a bond is worth than any individual investor.---Andrei Shleifer

INVESTMENTS Fourth Edition T'ypes of stock analysis a Technical Analysis-using prices and volume information to predict future prices Weak form efficiency technical analysis Fundamental Analysis-using economic and accounting information to predict stock prices Semi strong form efficiency fundamental analysis

INVESTMENTS Fourth Edition „ Technical Analysis - using prices and volume information to predict future prices - Weak form efficiency & technical analysis „ Fundamental Analysis - using economic and accounting information to predict stock prices - Semi strong form efficiency & fundamental analysis Types of Stock Analysis Types of Stock Analysis