Describe efficient market hypothesis
What do you understand by the term ‘Efficient market hypothesis’?
Efficient market is one where the market price of the security is a balanced approximation of its intrinsic value.
The efficient market hypothesis is depended on following statements which are illustrated below:
- Market is free and perfect with no any trade restrictions.
- Market takes up all the information rapidly and efficiently.
- Information is costless and free and is freely accessible to all at the same time.
- Information is right and fair.
- Market players can examine the information rapidly and it is absorbed in the market throughout sells and buys signals.
he following information is taken from the financial statements of an entity:
Property, plant and equipment $4,600,000 $4,200,000
Accumulated depreciation (1,800,000) (1,350,000)
Depreciation expense 560,000
Gain on disposal of PPE 65,000
The asset disposed of had a cost
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