Weak Form Market Efficiency Essay Example | Topics and Well Written Essays - 4250 words

Weak Form Market Efficiency - Essay Example However finance theory assumes idealistic models for the stock markets and formulates the investor utility functions and expectations accordingly. These models are based on perfect competition and passage of information in an unfettered manner. As Wikipedia (2007) seems to point out, "In economics and financial theory, analysts use random walk techniques to model behavior of asset prices, in particular share prices on stock markets, currency exchange rates and commodity prices. This practice has its basis in the presumption that investors act rationally and without bias, and that at any moment they estimate the value of an asset based on future expectations. Under these conditions, all existing information affects the price, which changes only when new information comes out. By definition, new information appears randomly and influences the asset price randomly. Empirical studies have demonstrated that prices do not completely follow random walk. Low serial correlations (around 0.05) exist in the short term; and slightly stronger correlations over the longer term. Their sign and the strength depend on a variety of factors, but transaction costs and bid-ask spreads generally make it impossible to earn excess returns. Researchers have found that some of the biggest prices deviations from random walk result from seasonal and temporal patterns. In particular, returns in January significantly exceed those in other months (January effect) and on Mondays stock prices go down more than on any other day. Observers have noted these effects in many different markets for more than half a century, but without succeeding in giving a completely satisfactory explanation for their persistence. Technical analysis uses most of the anomalies to extract information on future price movements from historical data. But some economists, for example Eugene Fama, argu e that most of these patterns occur accidentally, rather than as a result of irrational or inefficient behavior of investors: the huge amount of data available to researchers for analysis allegedly causes the fluctuations. Another school of thought, behavioral finance, attributes non-randomness to investors' cognitive and emotional biases". Taking an apposite viewpoint Leverton () states, "Without market fundamentals being able to predict prices, the investor is forced to learn new ways of investing.. Ratios and trend analysis are important to picking a winning portfolio. Subscribers to the adaptive expectations theory believe investors are backward looking in deciding on the correct price to pay for a stock". Realized and expected rreturns from the stock markets have been the subject of intense debate since a long period of time .Several theories suggesting various constructs and factors responsible for determining the returns from the stocks have been postulated thus far.It was not until the late 1960s and early 1970s that a fully-developed, empirically-supported theory of share prices' behavior emerged in the form of the Efficient Markets Hypothesis (EMH).Prior to the development of the EMH , analysts assumed some degree of dependence across successful price changes. Very many efforts were made towards identifying a predictable trading pattern which could be used for chasing profitable deals. From the mid-1950s to the early 1980s, a random walk theory (RWT) of share prices was developed based on the past empirical evidence of randomness in share price movements. RWT

I will down load the story that it needs to be taken from Essay

I will down load the story that it needs to be taken from - Essay Example Since its inception technology’s infusion into life has transformed the lives of human beings slowly and steadily and has evolved the human society into its present state- the state which is miraculously poles apart from where the society stood just a few decades ago. This infusion of technology and successive increasing inclination is, however having both good and bad effects upon it adapters. One the one hand there is one school of thought which argues that technology is to ma like blood is to human body. They claim that technology is extremely beneficial and it unending benefits make life extremely feasible for man to live their life. From computing devices assisting man at every unit time to the limitless number of software that do thousands of tasks for man, people argue that there is now way by which such a beneficial invention could be non- beneficial for man. â€Å"Digital technologies have had a profound impact on most aspects of human life. The rapid pace of technol ogical development has given the current generation one of the most fascinating eras in which to live. Technological advances are leading to life changing scientific breakthroughs, new business management paradigms, and a more inclusive and connected global society.† (Baldauf, Stair, 2011) On the other hand there is this other school of thought who argues that technology infusion is gaining a dangerous pace among human beings and it is thus becoming highly dangerous for their own personal lives. People afraid of the dangerous inclination of technology towards man contend that people get so very used to checking their connecting gadgets and their office work all the time that they even tend to forget their meal times and their personal obligations towards their families and friends. It is as if technology infusion has actually taken over their lives and their distractions from their personal lives are not even detectable to them. Others even maintain that the thought of assumin g that multitasking enables more productivity is actually not true. While people think that they actually are multitasking and are getting several tasks done simultaneously they originally are unable to concentrate on even one single task. There is absolutely no task of getting creativity done if one is multitasking and is trying to work at the same time on their Smartphone, laptop and tablet etcetera. People become this much freaks that even the thought of not remaining connected to their gadgets for the sixteen seconds in which the train in which they are travelling passes through a subway is not acceptable to them. The look forward to the passing of those sixteen seconds as soon as possible so that the connectivity to their gadgets is maintained again. â€Å"Technological change is the major source of cultural change in any society.† (Andersen, Taylor, 2007) My view is that over exposure to any thing is not safe and not good for anyone. Thus even the overexposure to techno logy is not recommended. Our personal lives are the most cherished things man has been blessed with. Thus we would be taking advantage of the benefits of technology but should not let them take over our minds and souls for all times. When it comes to the topic of the affects of things on the personal lives of human beings, most of us will readily agree that our family and personal lives should have the utmost importance and should not be neglected at all. Where this agreement usually ends, however, is on the question of whether this dangerous