1、simply by finding “the pattern” in the stock price movements, everyone would do it and the profits would be competed away. Sell Sell Buy Buy McGraw-Hill/Irwin Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 13-11 Semi-Strong Form Market Efficiency Security Prices reflect all p
2、ublicly available information. Publicly available information includes: Historical price and volume information Published accounting statements. Information found in annual reports. McGraw-Hill/Irwin Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 13-12 Strong Form Market Effi
3、ciency Security Prices reflect all information public and private. Strong form efficiency incorporates weak and semi-strong form efficiency. Strong form efficiency says that anything pertinent to the stock and known to at least one investor is already incorporated into the securitys price. McGraw-Hi
4、ll/Irwin Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 13-13 Relationship among Three Different Information Sets All information relevant to a stock Information set of publicly available information Information set of past prices McGraw-Hill/Irwin Copyright 2002 by The McGra
5、w-Hill Companies, Inc. All rights reserved. 13-14 Some Common Misconceptions Much of the criticism of the EMH has been based on a misunderstanding of the hypothesis says and does not say. McGraw-Hill/Irwin Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 13-15 What the EMH Does
6、 and Does NOT Say Investors can throw darts to select stocks. This is almost, but not quite, true. An investor must still decide how risky a portfolio he wants based on risk aversion and the level of expected return. Prices are random or uncaused. Prices reflect information. The price CHANGE is driv
7、en by new information, which by definition arrives randomly. Therefore, financial managers cannot “time” stock and bond sales. McGraw-Hill/Irwin Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 13-16 13.4 The Evidence The record on the EMH is extensive, and in large measure it
8、is reassuring to advocates of the efficiency of markets. Studies fall into three broad categories: Are changes in stock prices random? Are there profitable “trading rules”? Event studies: does the market quickly and accurately respond to new information? The record of professionally managed investme
9、nt firms. McGraw-Hill/Irwin Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 13-17 Are Changes in Stock Prices Random? Can we really tell? Many psychologists and statisticians believe that most people want to see patterns even when faced with pure randomness. People claiming to
10、 see patterns in stock price movements are probably seeing optical illusions. A matter of degree Even if we can spot patterns, we need to have returns that beat our transactions costs. Random stock price changes support weak- form efficiency. McGraw-Hill/Irwin Copyright 2002 by The McGraw-Hill Compa
11、nies, Inc. All rights reserved. 13-18 What Pattern Do You See? Double-click on this Excel chart to see a different random series. With different patterns, you may believe that you can predict the next value in the serieseven though you know it is random. McGraw-Hill/Irwin Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 13-19 Event Studies: How Tests Are Structured Event Studies are one type of test of the semi-strong form of market efficiency. This form of the EMH implies that prices should reflect all publicly available information. To test this, even
