Based on recent event, discuss whether the stock markets are efficient Essay

Based on recent event, discuss whether the stock marketplaces are efficient jibe to the Effficient Market Hypothesis - Essay ExampleThis is based on the ideal of a balancing act, where markets are regarded as knowing the best agency forward. However, skeptics of the above, view markets as being necessarily inefficient due to the unlike forms of risks involved. The reasoning behind the aforementioned theory is that a free and competitive market arena does place various pricing indices to their true basic values. Lo (2007), provides that the Efficient Markets Hypothesis (EMH) does showcase the fact that market pricing indices do fully fall all available data. This however does not eliminate critique, especially from behavioral economists and psychologists, who view it as being founded on assumptions which are counter-factual, especially with regard to man behavior/ rationality. A distinction is made between technical and fundamental analysis of stock pricing indices. The former, entails the utility of volume charts and geometric patterns in pricing, towards foretell a given securitys future price fluctuation. The latter on its part, is concerned with the utility of both economic and accounting data, towards determining a given shares fair valuation. Pegged on this assumption is the fact that as the existing market enhances overall efficiency, so does the price sequencing become in all unpredictable and random (Lo, 200717). As Shiller (2013) provides, though humanity continues being influenced by past global occurrences in the market arenas, this does not in any delegacy remove the presence of existing market anomalies. The fact that the South American state of Colombia continues experiencing a real-estate bubble, which is ongoing, is representative of the volatility of the current market sector. With its real-estate pricing advocator rising by 69%, in terms of inflation-adjusted calculations, it provides a crucial insiders view of how market inefficienc y continuously evolves. Rationality in individuals participation in various economic bubbles is educated by amongst others, the price increases as a result of the prevailing psychological contagion. It is this fundamental human aspect, which promotes a given mindset of justifiable price increases, thereby spurring fervent market activities. Due to the inherent nature of