The Definition of Efficient Market Hypothesis

The definition of Efficient Market Hypothesis

According to Lumby and Jones (2011, p.357) that the efficiency market is divided by three levels. The initial level is weak form efficiency. It means that the analyst cannot apply the past information of the market to predict the future share prices movement. The next level is semi-strong form efficiency, according to the company information including share prices, enough data to illustrate the operating information, when investors gather these information, they will quickly reaction to the share prices. The last level is strong-form efficiency that it includes all-around news, not only outside information, but also has inside information. The result is market share price will be steadily trained. Every investor can obtain the information and response to the share prices.

The Capital Market Efficiency

The concept is security prices that it is objective reflect the comprehensive information from the market. It is available to exchange market. Meanwhile, any news could be used in the business. This information belongs to the security price of sense and celerity that it means a movement forward to direction of the security price.

The next concept of the secondly capital market is not really perfect, but efficient. The secondly capital market plays an important role in the capital market. Furthermore, the investors are in capable of using the precise information to predict the share price in the capital market. Overall above the evidence of the current security price could gather valid prediction, no particular risk in the capital market. (McLaney, 2011, pp255-256)