Homework: Efficient Market Hypothesis
In 1 to 2 pages homework, explain the Efficient Market Hypothesis and its implications on financial decisions.
Introduction
Your homework will focus on an interesting theoretical concept called the Efficient Markets Hypothesis (EMH). This concept tries to provide adequate answers to such questions as, "Are stocks in equilibrium?" and "Is it possible for an investor to consistently 'beat the market' without any inside information?"
Preparation
Read the following article:
a. Malkiel, B. G. (1989). Is the stock market efficient? Science, 243(4896), 1313-1318.
b. Malkiel is a seminal, foundational author in the field. Everything you read about the EMH will refer back to this fundamental explanation of the EMH theory. As you read this article, pay particular attention to the three levels of market efficiency to help you prepare for your homework.
In addition, conduct research in the Capella library or the Internet on different perspectives on the EMH. You might try using search terms such as "efficient market hypothesis controversy" and "efficient market hypothesis perspectives" to obtain relevant results.
Task
Use your research to complete the following:
a. Explain the EMH.
b. Distinguish among the three levels of market efficiency.
c. Briefly explain the implications of the EMH on financial decisions by individual investors.
Format your homework according to the give formatting requirements:
a. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
b. The response also includes a cover page containing the title of the homework, the course title, the student's name, and the date. The cover page is not included in the required page length.
c. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.