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Efficient Market Hypothesis Assignment (Solved)
Added on -2020-11-23
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APPLICATION ANDCRITICAL EVALUATIONOF EFFICIENT MARKET
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1MAIN BODY..................................................................................................................................1Discussion on Efficient Market Hypothesis................................................................................12. 2 years share price of Tesco.....................................................................................................23. Application of Efficiency Market Hypothesis on company data.............................................54. Reflecting arguments for events incurred in Tesco.................................................................8CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9
INTRODUCTIONEfficient market hypothesis is used by economists or investors to predict the growth of sharevalue of an industry. Thus, it will assist them in investment decision as well as predictingprofitability of the firm in the upcoming period. In the present report there will be discussionbased on analysing the 2 years of share value of Tesco to be measured to analyse the growth ofmarket value.MAIN BODYDiscussion on Efficient Market HypothesisEfficient market hypothesis is a financial theory which states that prices whichincorporated in market already reflecting relevant information which impact stock that is why itis impossible to beat market. It is because market prices react to new information on risk-adjustment basis (Pan, 2016). This hypothesis is developed by Eugene Fama which argued aboutstocks which always trade at fair price. According to Fama, it becomes impossible for investorsthat they either purchase undervalued stocks or sell them at inflated price. There are three variants of hypothesis which includes weak, semi-strong and strong form.Weak form:In weak form of hypothesis, prices which established on traded assets are reflecting pastpublicly information. In this form, investors will able to analyse information by which return willproduce above market average (Choudhry and Jayasekera, 2015). But for generate this return nopattern exist in market. Therefore, long term advantage will not get generated in this form.Semi-strong form:This is the type of theory which follows which is based on belief that information that isfor public will use in calculation of current prices of stocks (Kim, Wagner and Colicchia, 2019).According to this form, investors will not able to utilise technical and fundamental analysis inorder to gain higher return in efficient market. People who Strong form:This is the form both public and private information priced into stocks and no investorswill able to develop long term advantage over market (Lo, 2017). It states that all information inmarket, whether it for public and private accounted for prices of stock.1
2. 2 years share price of TescoThere has been selection of 2 years records of changes in the share prices on the basis ofmonthly data. Thus, it has been further analysed to detect the share value, index and Prices.Thus, in relation with analysing the efficiency of Tesco with respect to retain the adequategrowth and profitability on which managing such operations with the influences of the FTSE 100index have been ascertained.DateTESCOShare valueShare indexShare price01-01-1701-02-17184.4381844.3810001-03-17181.69691816.96998.51382-27.410931-03-17179.39631793.96397.26647-23.005830-04-17179.83691798.36997.505324.4053631-05-17165.25021652.50289.59662-145.86730-06-17170.53661705.36692.4628552.8642231-07-17177.09571770.95796.0191165.5909831-08-17183.21431832.14399.3365361.1857630-09-17177.58521775.85296.28451-56.290901-11-17190.98941909.894103.5521134.042201-12-17205.94972059.497111.6634149.602701-01-18205.70372057.037111.53-2.4604801-02-18207.47532074.753112.490517.7162201-03-18202.65252026.525109.8757-48.227431-03-18232.17942321.794125.8848295.268430-04-18241.82482418.248131.114496.4544731-05-18254.71722547.172138.1045128.923530-06-18258.28932582.893140.041335.7215931-07-18252.63342526.334136.9747-56.559431-08-18237.94772379.477129.0123-146.85730-09-18211.65242116.524114.7553-262.95301-11-18197.551975.5107.1092-141.02401-12-18190.11901103.0699-74.501-01-192182180118.1969278.999915-01-19218.12181118.25111.000062
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