财务会计理论Efficient Securities Markets推荐.ppt

* Chapter 4 Efficient Securities Markets * Chapter Overview Fundamentals of efficient market hypothesis (EMH) Background Three forms of EMH Characteristics of EMH Prediction of EMH Contribution of EMH Criticism to EMH * EMH: Background (1) Stock market Number of stockholders in USA 1940: 4 million 1952: 7 million 1962: 17 million Deductive approach got stuck in standard setting Standard setters desperately need theoretical guidance; yet work from conceptual framework project resulted in little success Accounting theory and research gained more support and encouragement from standard setters and market regulators * EMH: Background (2) Major development took place in other disciplines Information economics Finance Behavior science: Game Theory, etc. = Triggered EMH studies in the accounting field in 1960s * EMH: Background (3) Fama, Eugene (1939- ) Father of EMH 1965, “Random walks in stock market prices” Stock price movements are unpredictable and follow a random walk 1969, “The adjustment of stock prices to new information” Stock prices respond to new information 1970, “Efficient capital markets: a review of theory and empirical work” Proposed three forms of efficiency * Three Forms of EMH (Fama, 1970) Strong form Price fully reflect public and private information Semi-strong form Price fully reflect public information Weak form Price fully reflect historical (past) information (i.e. no reaction to new information) Semi-strong form is believed to be the form that is closest to real capital market behaviors, and is the one used in class if not otherwise mentioned * Semi-strong Form of EMH Price fully reflect public information = In contrast to strong form of EMH Private (insider) information will gain abnormal return This is NOT in conflict with semi-strong format In contrast to weak form of EMH New information is quickly absorbed/reflected in price Assume investors are rational * Characteristics of EMH How do price fully reflect all availabl