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The efficient market hypothesis and corporate event waves: part 1

Hu, May 2014, The efficient market hypothesis and corporate event waves: part 1, Corporate finance review, vol. 18, no. 5, pp. 20-27.

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Title The efficient market hypothesis and corporate event waves: part 1
Author(s) Hu, May
Journal name Corporate finance review
Volume number 18
Issue number 5
Start page 20
End page 27
Total pages 8
Publisher Thomson Reuters
Place of publication Boston, Mass.
Publication date 2014-03
ISSN 1089-327X
Summary Efficient markets are commonly defined as ones that do not allow investors to earn above-average returns without accepting above-average risk. In a traditional framework, where investors are rational and there are no frictions, the efficient market hypothesis (EMH) states that a security's price reflects its fundamental value, which is the sum of its discounted expected future cash flows. Put simply, under the EMH, securities are "rightly priced." Through this study, the author finds that while the EMH has been widely accepted for decades among academics, practitioners and regulators still appear to be unconvinced. From a behavioral perspective, the author shows that human psychology and sentiment factors can account for some discrepancies in financial markets. He also finds evidence of limited arbitrage being risky and costly and, hence, impeding the ability of investors to take advantage of profitable opportunities. This study provides an extensive analysis of the critical discussions surrounding the EMH and deepens and strengthens the understanding of the EMH, as well as the arguments for and against.
Language eng
Field of Research 150201 Finance
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2014, Thomson Reuters
Persistent URL http://hdl.handle.net/10536/DRO/DU:30069565

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