Applying the EMH Evaluate the Role That Government Played In Economic Essay

Applying the EMH Evaluate the Role That Government Played In economical Recovery Using Recent Real-life Examples - Essay Examplebecause of the market volatility due to the different government policy and the detailed study would tend to dig a great learning opportunity about this adverse scenario. Efficient Market Hypothesis (EMH) Theory Efficient market hypothesis implies that, if any overbold information about a company is revealed it will be immediately incorporated into the sh ar terms rationally and rapidly, with respect to the direction of the share price movement and its size. In an efficacious market except by chance, no trader will get an opportunity to earn aberrant return on a share or a return which is greater than the fair return for the risk associated to that share. The possibility of absence of abnormal profits arises because the past and contemporary information is immediately reflected in the current share prices. The prices are affected only by the new infor mation. EMH is concerned with under what conditions an investor can gain abnormal profits or excess returns in a stock. EMH claims that all the information available readily reflects in the price of the stock. According to EMH abnormal positive returns are not possible by any trader using the information available to public. Many people think that market efficiency look ons that it is inconceivable to outperform the market at any given point of time which is incorrect. Efficiency does not mean that prices will not apart from true take account At any point of time it is expected that prices will deviate from their true value, majorly because value depends on the future and future is unpredictable. Efficiency does not mean that no investor will be able to beat the market in any single time period. In an efficient market approximately unrivaled half of the shares purchased subsequently outperform not because of the skill but due to the fact that prices... This report stresses that market efficiency has been tested over a grand period of time and it has been observed that movement of the stock prices follow a random walk. The random walk theory states that an investor can have a steady-going chance of beating the market if they throw darts on New York Times stock listing pages. Investors who adhere to the random walk theory guess that searching for undervalued shares or predicting the future stock price is just a waste of time. Any new developments of government like restructuring the tax legislation, controlling the pecuniary crisis and the inflation etc reflect in share prices of the different corporation. Followers of random walk theory believe that is impossible to predict future events and they are leftover with no other choice but to accept the efficient market hypothesis.This essay makes a conclusion that it cannot be denied that the government interventions play a polar role in stabilizing the economies that were overturned due to the financial c risis as result of devaluation of properties or inability to service the debt obligations. Due to the global crisis, the investor confidence gnaw which had adverse impact on the stock prices. The fluctuation in the stock prices was also due to drift in the present market condition. As a result of revised regulations and containing policies by the government, the economies started to revive and the interest of the investors were protected. This resulted in the decrease in volatility of share prices which reflects belief of the investors from their anticipation of future events in the economy. This follows the efficient market hypothesis.