Literature review on efficient markets.

The first 200 words of this essay...

Literature review on efficient markets

Abstract

This article is mainly does a thorough review of the efficient market from 1960' to now. This article tries to discuss efficient market historically and theoretically. In the historical part, mainly introduce the theory development by timeline. And in the theoretical part, review the model of efficient market, and discuss some empirical research on the CAPM. The third part is maily about different ideas on efficient market, some criticism show up when the economy developing and the market becoming more and more mutual while there are also more and more problems revealed. And then comes to the conclusion.

1. Introduction

The efficient market hypothesis (EMH) is one of the corner stone of modern financial economics. An efficient market is one in which securities prices reflect all available information. This means that every security traded in the market is correctly valued given the available information. The efficient market hypothesis (EMH) tests the assumption that stock markets reflect the available information in the stock prices. A market is said to be efficient with respect to an information set if the price 'fully reflects' that information set (Fama,1970), i.e. if the price would