Friday, January 31, 2020

The Efficient Market Hypothesis Essay Example for Free

The Efficient Market Hypothesis Essay In modern financial economics, one of the most essential constructions , which plays a significant role in financing strategy, is efficient market hypothesis (henceforth EMH). Despite the fact that its first theoretical formulation, which was founded by Paul Samuelson in 1960s, is almost five decades old, numerous academic studies have been conducted about it (Alajbeg, Bubas Sonje, 2012). According to Alajbeg et al. (2012), in the middle of 1960s market efficiency was defined by Samuelson as the existence of a complete competition in a market, albeit under an assumption that all participants have equally the same opportunity to access the available information. Furthermore, Fama (1965) cited in Alajbeg et al. (2012) attempts to show the EMH empirically. This essay will try to critically debate all the forms of efficiency and give sensible evidence why most of the forms seem to be illogical in the current economic situations. It will start by introducing how to recognise efficiency and what are the forms of the EMH, following by testing each form in today’s economic circumstances with presenting coherent arguments. Damodaran (2001) points out that market efficiency is distinguished by three different measurements. First is considering the amount and the distance of diverting price from real value in the market. The second measure is by looking at the pace and the quantity of adapting prices to new information which come to the market. Finally, it is measured by determining the possibility of usual gaining higher profits by some investors in the market while they may expose the same rate of risk that other investors reveal. Generally, economists have divided the EMH into three main forms based on the type of the information reflected in security prices. The first type of the EMH is weak form. In this form of efficiency, the only information depending on is the past prices information. However, any other available stock information seems to be invaluable in these markets. As Hillier, Ross, Westerfield, Jaffe Jordan (2010) state no information, apart from the historical prices, is relied on by the investors in the weak form efficiency. In the light of this, a capital market is considered to be w eakly efficient when it contains price information about the past share prices. Hillier et al. (2010) also confirm that predating strategy is unlikely to be able to produce returns in the market operations. Put another way, information for future is not predicted in this form of efficiency. This seems to be a possible reason why these markets are called weak efficiency. The second type of the market efficiency is semi-strong form. According to Ross, Westerfield Jordan (1993), the semi-strong efficiency is the most controversial form among all the three forms. From this perspective, Ross et al. (1993) mention the reason why this form in the markets is more controversial than the other forms is that it warns an expert, who analysis financial information in order to find mis-priced stock, to not waste time in analysing some possibly useless information, for instance, financial statement information because this information is already included in the current stock prices. Brealey, Myers Allen (2011) maintain that in these markets, prices rapidly incorporate whole publicly available information, such as last quarters earning declaration, a proposal of unifying other companies and an unfamiliar matter of stock. In the light of this finding, it can be said that the semi-stro ng market efficiency rely on both historical and public information at the same time (Brealey, Myers Allen, 2008). Strong form efficiency is the final form of efficiency. Ross et al. (1993) emphasise all types of information, either public or private, are more likely to be incorporated in the stock market prices when the market is efficiently strong. Additionally, in this kind of market, it is impossible to determine any incomparable investors who are able continually to vanquish the market (Brealey et al., 2011). Expressed differently, strong competition is highly considered among the investors of the strong market efficiency. Therefore, the crucial investors may not be able to keep their high position in the long-term. According to Brealey et al. (2011), since Maurice Kendall published his controversial paper in 1953 on the behavior of stock prices, a significant amount of financial research has been done to test the EMH. In the light of that background information, both supporting and disapproval evidence has extended to each of the three forms weak, semi-strong and strong. Firstly, in order to test the weak form of this hypothesis, Brealey et al. (2011) evaluate the profitability of some trading rules which is utilised by investors who seek to determine patterns in security prices. Hillier et al. (2010) claim although the share price movements are random, investors tend to notice patterns. However, the existence of patterns in the past price data, which is the main information in weak form efficiency, seems to be unreal, according to Hillier et al. (2010). As an example, Hillier et al. (2010) illustrate the participation between Shell transport and Royal Dutch Petroleum, which randomness is highly predicted instead of pattern in their stock price. Then Brealey et al. (2011:352) demonstrate ‘‘since both companies participated in the same underlying cash flows in 2005, it would be expected the stock prices to have moved in exact lockstep, while the real price of the tow shares sometimes diverged substantially’’. Therefore, Hillier et al. (2010) confirm that the security choices based on patterns of historical price changes would not be as acceptable as random choice. As a consequence of this evidence, it can be assumed that the weak form efficiency seems to be a meaningful form in the new economic environment. Secondly, in examining the semi-strong efficiency, the speed of reacting security prices towards announcements is measured (Brealey et al., 2011). According to this form of efficiency, previous price information would not have any influence on present actual return because this form implies that in an efficient market, historical information has merely reflected in the current prices (Hillier et al., 2010). Whereas, in many empirical cases past information impacts on stock prices. For example, Hillier et al. (2010) highlight the global credit crisis of 2008 which firstly started only from the British bank Northern Rock. Then it slowly continued and cover some other banks, such as, Bear Stearn, the US investment bank, HBOS and Lehmann Brothers. Hillier et al. (2010) also state that it had not stopped unless the short selling would have been temporarily avoided by the US and UK governments. From the light of this empirical circumstance, the semi-strong efficiency is probably no longer a sensible form in todays economy because the standard test requirement, which economists follow , may not be reflected in it. Finally, In terms of testing the strong form efficiency, Brealey et al. (2008) point out that the performance of the managers in the markets is depended on. Hillier et al. (2010) imply that it is more likely to profit from a personal information which the other investors do not have in the market, whilst in the strong efficient market it is unlikely to be profited from this information by their owners. Further to this, Brealey et al. (2011) claims that it is probably more common that a particular manager in a market, who is more clever than the others, could make superior profits. This seems to be an appropriate evidence against the EMH in the case of strong form. Similarly, Damondaran (2001) points out that some investors can earn more profit than the others whilst they have the same chance of risk. Brealey et al. (2011) take a large sample of the US companies in order to test the proportion of annual profits among them from 1926 to 2008. Brealey et al. (2011:349) prove ‘‘since 1926 the stock of the firms with the lowest market capitalizations have performed substantially better than those with the highest capitalizations’’. In the same way, Alajbeg et al. (2012) criticise the EMH because of the effectiveness of some anomalies in the market, for example, January effect, weekend effect and momentum effect. As a result of the aforementioned arguments, it can be argued that the strong market efficiency does not make sense in the current economic situations because of the possibility of out-performance in the market. In addition, the EMH has faced many criticisms. For example, Brealey et al. (2011) mention a stock market bubble in property prices in the US. In a way, the price has almost doubled by 2005. Nevertheless, the EMH considers that prices always equal to the values inside the efficient markets (Brealey et al., 2011). This can also be noticed as an evidence against the EMH. In conclusion, the participants mostly try to exploit each single discovered mis-pricing in the stock market. This competition results in market efficiency (Brealey et al., 2008). There are three forms of efficiency: weak, semi-strong and strong. The weak form efficiency seems to be significant in todays economy because it considers that prices are random and that is proved in the empirical situations. However, the strong form is generally considered to be meaningless because of the out-performance which can be executed by some investors. Similarly, the semi-strong form may be seen as an insensible form of the EMH in the current economy. This form is unlikely to provide the common test demands when it tests to find how rapidly prices respond to the new information. Furthermore, there are many debates about the EMH in empirical situations because of occurring some bubbles and crisis. Apparently, there are considerable arguments about market efficiency along the history of the capital market. Nonetheless, financial market efficiency is constantly under debate. In other words, it is still a challenging issue in the current financial economics (Alajbeg et al., 2012). References: * Alejbeg, D., Bubas, Z. And Sonje, V. (2012)The efficient market hypothesis: problems with interpretations of empirical tests. Financial Theory and Practice. Available at: http://core.kmi.open.ac.uk (Accessed at 17th August 2012). * Brealey, A., Myers, C. And Allen, F. (2011) Principles of Corporate Finance (global edition). New York. Mcraw Hill/Irwin. * Brealey, A., Myers, C. And Allen, F. (2008) Principles of Corporate Finance (nine edition). New York. Mcraw Hill/Irwin. * Damodaran, A. (2001) Corporate Finance: theory and practice. Second edition. United States. John Willey Sons, Inc. * Hillier, D., Ross, S., Westerfield, R., Jaffe, J. And Jordan, B. (2010) Corporate Finance. Mcraw-Hill. * Ross, S., Westerfield, R. And Jordan, B. (1993) Fundamentals of Corporate Finance (second edition). Boston. Irwin Inc.

Thursday, January 23, 2020

The Affects Of Sin On Man In The Scarlett Letter Essay -- essays resea

The Affects of Sin on the Individual in The Scarlet Letter   Ã‚  Ã‚  Ã‚  Ã‚  In the novel, The Scarlet Letter by Nathaniel Hawthorne, there is a reoccurring theme of the affects of sin on man. The three main characters, Hester Pryne, Arthur Dimmesdale, and Roger Chillingsworth, are all affected by the sin of Hester Pryne and Arthur Dimmesdale. Hester Pryne is strengthened by the sin, Arthur Dimmesdale is weakened by it, and Roger Chillingsworth becomes evil because of it.   Ã‚  Ã‚  Ã‚  Ã‚  The protagonist, Hester Prynne is, in essence, strengthened by the sin she commits with Arthur Dimmesdale. She turns the meaning of the letter â€Å"A† from adultery to able. She seeks redemption in the eyes of God and man through the good deeds she does for others. She becomes â€Å"self-ordained a Sister of Mercy,† who’s new role is that of a tender nurse to the colony’s ill(158). She asserts that fulfillment and love are worth fighting for, and she continues to walk about Puritan Boston with her head held high. However, the sin she commits has the opposite affect on her lover, Arthur Dimmesdale.   Ã‚  Ã‚  Ã‚  Ã‚  Weakness and frailty overcome the minister, Arthur Dimmesdale. Dimmesdale becomes an unknowing victim to Hester Prynne’s husband, Roger Chillingsworth. Chillingsworth maneuvers himself into an intimate friend and constant attendant to Dimmesdale. The worse Dimmesdale feels, the stronger he appears in the eyes of his congregation. He grows pale and thi...

Tuesday, January 14, 2020

Football Factory Blog

Not Just A Sport In the novel â€Å"Football Factory† written by John King, we follow a group of Chelsea hooligans in the present England. I think of this novel as an extremely realistic and kind of frightening novel. Together, we follow the main character’s life as a football hooligan. The life of the main character is filled with violence, alcohol and sex, in which his lovely friends accompany him. Through the novel we are bound to listen to his friends’ nasty thoughts and actions. At some point in the novel the main character and the boys watches the film Clockwork Orange, as they have done so many times before.The Clockwork Orange is basically just a couple of guys giving beatings and rapes women for the fun of it. This makes me think of Football Factory of an updated version of Clockwork orange, just not to the same extent. In the novel we don’t have the â€Å"normal† narrative-style. We don’t see a real plot in the novel as such. Itâ₠¬â„¢s more like a story going on and on about his life without a greater meaning. One thing in particular I liked about this novel was the fight scenes. At these points in the novel, I would enjoy reading it.I would suddenly become interested and I would read at a fast pace due to the great and realistic writing. When there were no fighting I would keep losing track and get distracted. Our main character starts questioning himself and his own actions while he is being formed into a somewhat reasonable man. He starts believing he isn’t on the right path. Personally I wouldn’t recommend this novel to any of my friends, as I don’t think they would be interested, since the narrative style is far from usual. Otherwise, an interesting novel.

Monday, January 6, 2020

Comparison Between A Good Man And Young Goodman Brown

Andrew Long Mr. Tarango English 110 10 January 2015 Making Comparison Both â€Å"A Good Man is Hard to Find â€Å"and â€Å"Young Goodman Brown† has the elements of religious belief using allusions and moral coding. When comparing the main characters of both short story, it’s interesting how they compare and contrast on their beliefs. In â€Å"A Good Man is Hard to Find,† Young Goodman Brown undergoes a transformation that shifts from similarities of the grandmother to the Misfit. With beliefs alike to both the Misfits and the grandmother’s, Brown’s persona alters from his naive views as he believes that everyone had an equivalent faith until he is accumulated into thinking more judiciously. In the beginning, he was like the grandmother because his entire faith was given to God, yet he was willing to meet with the devil. This caused him to contain similar qualities to the grandmother as they are both ignorant. Their confidence regarding faith weakened due to the encounter of fear, when realizing t heir true faiths. Only experiencing divine grace once proven wrong and discovering the truth about themselves along with their previous beliefs. Taking a trip to the forest, Brown discovers the truth that there is evil in all individuals realizing all that he had once thought to be true was a lie. After that one night, whether it was a dream or not, his ideas were set in stone. Because of the discovery in the forest, he believes that once a sin has been committed, one is automatically evil. AsShow MoreRelatedAnalysis Of The Book Young Goodman Brown And The Devil And Tom Walker 1219 Words   |  5 Pagesera. Hawthorne’s, â€Å"Young Goodman Brown† is a story about a man, Goodman Brown who happens to set out on a trip for an evil purpose. On the way he meets a man who offers him his staff, saying that it might help him walk faster, but Goodman Brown refuses and wishes to return back to his village for the sake of his wife, Faith. On the other hand, Irving’s, â€Å"The Devil and Tom Walker† is about an individual who lets his greed and selfishness take charge of him. Tom Walker, a greedy man, atte mpts to makeRead MoreLesson 1. Brooke White. Eng 2020: Introduction To Literature.1675 Words   |  7 Pagesthink the Witches’ Sabbath was a dream—the events described, author’s word choice, and sudden-ending of the Witches’ Sabbath all contributed to my conclusion. This affected my interpretation of the piece because as a dream, the piece emphasizes Young Goodman Brown’s distrust and uncertain feelings towards humanity. His dream was created by a subconscious thought that it is a natural instinct for all humans to become evil and impious at one point or another. If I interpreted it as a real experienceRead MoreThe Brown s A Forest, And The Devil !1742 Words   |  7 PagesThe Brown’s, A Forest, and The Devil! Oh My Hawthorne’s â€Å"Young Goodman Brown† tells a tale of when man, who is supposedly good in nature, faces temptation and evil head on. The story, much like the tale of Adam Eve, is an allegory for the evil and selfishness of mankind; for young Goodman Brown s fight with his inner temptations and his outward struggle with the devil himself represents mankind s lost encounter within the battle of good and evil. Though it is not clear whether the events in theRead MoreNathaniel Hawthorne s Young Goodman Brown1543 Words   |  7 PagesIn Nathaniel Hawthorne s short story of Young Goodman Brown, the author uses symbolism and allegories in order to showcase the Puritan faith as well as man s conflict between good and evil. This analysis will break down the techniques that the author uses to critique the puritan society and to show the difference between how people appear to be in society and the true colors that they are hidden inside of them. There has been a lot of great authors in our time, but none more interesting thanRead MoreNathaniel Hawthorne s Young Goodman Brown1492 Words   |  6 PagesIn Nathaniel Hawthorne’s short story of Young Goodman Brown, the author uses symbolism and allegories in order to showcase the Puritan faith as well as man’s conflict between good and evil. This analysis will breakdown the techniques that the author uses to critique the puritan society, and to show the difference between how people appear to be in society and the true colors that they are hidden inside of them. There has been a lot of great authors in our time, but none more interesting than NathanielRead MoreCompare And Contrast Young Goodman Brown And The Devil And Tom Walker773 Words   |  4 Pagesworking for the devil. Another short story, â€Å"Young Goodman Brown,† written by Nathaniel Hawthorne in1835, describes Goodman Brown’s woodland tramp with the Devil. The two stories share specific ideas regarding the devil, overpowering minor deviations between each other. Both authors describe the devil similarly. When first encountered, they portray him described as a mostly normal person, with only a subtle clue to his identity. In â€Å"Young Goodman Brown,† â€Å"the only thing about him that could be fixedRead MoreNathaniel Hawthorne s Young Goodman Brown1695 Words   |  7 PagesShort story, Young Goodman Brown, by Nathaniel Hawthorne is set in Puritan New England. Hawthorne uses symbolism, description, scenery, and Goodman’s journey to illustrate a nd symbolize the battle of good versus evil. In the first scene, we see how Young Goodman Brown leaves his wife, Faith, to start on his â€Å"evil† journey through the woods. Though Faith asks him to stay with her, he chooses to continue on even though he knows the evilness lies ahead. As the story continues, we see how HawthorneRead MoreThroughout The Beginning Of The Course We Have Read A Wide1487 Words   |  6 Pagesaround them. In particular Young Goodman Brown, Araby and A Good Man Is Hard to Find all deal a character s realization of the bitter world they live in. The journey is merely a prompt or tool that helps to unearth the misery that each character finds. I will be comparing and contrasting the characters journeys in the three stories and determining what I think the purpose of the journey was for the characters. First I want to examine the differences and similarities between the purpose of the journeysRead MoreThe Scarlet Letter, By Nathaniel Hawthorne1422 Words   |  6 Pages The eighteenth-century author, Nathaniel Hawthorne was born on July 4, 1804 in Salem, Massachusetts. He was most famous for his writings The Scarlet Letter, â€Å"Young Goodman Brown,† â€Å"The Minister’s Black Veil† and an abundant array of other books and short stories. The stories that are mentioned contain a copious amount of symbolism throughout the entirety of each book. All the stories that he ever wrote have an underlying meaning and the symbolism was hidden within in the names, characters, placesRead MoreOf Witchcraft In Young Goodman Brown And Washington Irvings Rip Van Winkle1126 Words   |  5 PagesIn Nathaniel Hawthorn’s Young Goodman Brown and Washington Irving’s Rip Van Winkle share a common ground of witchcraft and a man vs man inner conflict of the unknown. We witness our two protagonist Goodman Brown and Rip endure life or death situations and what they conquer throughout their self-entitlement. Firstly, we see the journey of young, newly wedded Goodman Brown, and his wife Faith. A Puritan believed couple, who’s in the mindset of being set for life all because of Faith being an Elite