Importance of EMH in the valuation and investment Internet-related stock market

1.0Introduction

1.1Purpose

The purpose of this overcompensate is to investigate the Internet-related stock food market, and the importance of EMH in its valuation and investment.

1.2Scope

Various textbooks on finance and certain web-sites were used to pick up information and discuss the issues.

1.3Limitations

The limited word count of this report is a big limitation as a enumerate of other serious issues could not be covered and the modern issues stated could be in a more gunpoint form.

1.4Background

Efficient market hypothesis (EMH) states that the charge of a security accurately reflects the information. Various different types of information ar relevant to determine an asset, including, in the case of shares, decisions made by the management of the company. As information is what is important in the pricing of a share, the scheme of EMH is important in share valuation.

There has been mixing evidence of EMH. demonstrable capital markets are usually semi-strong form and developing ones are of weak-form. From past evidence it can be seen that they both relieve oneself market anomalies. These are discussed later.

The size and potential of the Internet-related stock market is so huge. Some of these stocks that have had stock prices going through with(predicate) the roof. Most of these stocks had been highly overvalued, until the point at which the market had gain and since then the market has been adjusting the prices.

The implication of EMH to Internet stocks is very important to investors and corporate management, as it is the information that is being used to price the stocks.

2.0EMH Theoretical framework

2.1Definition of Fama (1970, 1991)

In an economic market the prices of securities fully reflect all available information.

Fama presented the efficient market theory in terms of a seemly game model, contending that investors can be confident that a reliable market price...

Explaination on EMH is good and referencing helps a lot. I testament have a business finance exam in a few days and this is going to help me a lot. Thankx

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