A Critical Review of the Efficient Market Hypothesis

Date of Award

2004

Document Type

Thesis

Degree Name

Bachelors

Department

Social Sciences

First Advisor

Strobel, Frederick

Keywords

EMH, Efficient Market Hypothesis, Reynolds, Paul M.

Area of Concentration

Economics

Abstract

This thesis endeavors to examine selected research concerning the Efficient Market Hypothesis (EMH) and was written for the purpose of educating the average investor and assumed they had little knowledge of the concepts discussed herein. The EMH states that the market correctly prices securities based on the available information and, therefore, concludes that no one can consistently earn a rate of return that is greater than that of the market. The fundamental idea proposed within this thesis is that the published research validating the EMH actually fails to do so because the authors generally included concepts outside the realm of the EMH such as risk and diversification as well as constructing test portfolios that are subject to the exemptions assumed by the hypothesis. These exemptions include zero transaction cost, free dissemination of information, a complete understanding of that information by the market, and the swift price adjustment to new information.

Rights

This bibliographic record is available under the Creative Commons CC0 public domain dedication. The New College of Florida, as creator of this bibliographic record, has waived all rights to it worldwide under copyright law, including all related and neighboring rights, to the extent allowed by law.

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