Financial Investment Research Paper 2022

Running Head: Financial Investment
Theoretical and Empirical Evidence of the Efficient Market Hypothesis
Name of the University
Name of the Student
Author Note

Financial Investment1
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
About Efficient Market Hypothesis.............................................................................................2
Empirical evidence of the EMH..................................................................................................3
Challenges to the EMH theory....................................................................................................4
Conclusion.......................................................................................................................................5
Reference and Bibliography............................................................................................................6

Financial Investment2
Introduction
The paper discusses on the “Efficient market hypothesis” which was launched by the
“Eugene Fama”, in 1965 as an efficient market, it holds the investors and helps them to buy
securities at an efficient or a normal price with accurate information. EMH theory work on the
empirical evidence and the challenges which explained on its three forms that are a “weak, semi-
strong and strong form” of the EMH.
Discussion
About Efficient Market Hypothesis
“Efficient market hypothesis (EMH)” is the investment community which is chosen by
the investors for investing strategy purpose. This hypothesis is an assumption in financial
economics which implies that the asset price shows all the available information. Its investment
theory is launched by the Eugene Fama, in 1965 as an efficient market, it holds the investors and
helps them to buy securities at a useful or a reasonable price with accurate information. Here
Investors should receive a total rate of return with the recognized risk of security. EMH helps to
buy rationale passive mutual fund like stocks and exchange-traded Funds. EMH does not want
that the investors be rational instead want individual investors to act randomly as a whole market
that is a market always detect a correct rate. In the EMH, there are 3 forms one is “weak form,
second is semi-strong form, and the third is the strong form” (Hamid et al., 2017). The “Weak
form” of the EMH presumes that the current stock price shows that all the information regarding
the currently available security market. It maintains that the past price and the volume data are
not linked directly with future security prices or the stock. Therefore it can be said as an extra
return cannot be attained using the technical analysis. The second form of the EMH is the “Semi