Explaining securities markets efficiency

Razeen Sappideen

    Research output: Contribution to journalArticle

    Abstract

    This article examines the claim of securities markets efficiency based on the efficient markets hypothesis (EMH), which Fama proclaimed to be a well substantiated truth in 1978. Behavioural theory (more particularly prospect theory) shows that individuals do not act to maximize their utility as asserted by neoclassical economists, while entrepreneurial theory explains share price movements to be the product of error prone guesswork by market participants. Alongside this, the emergence of the shareholder value concept in the late 1980s advocated by both corporate managers and outsider market makers has undermined the very foundations of share price efficiency. More importantly, the undermining seems to have been caused by forces exogenous to the firm. Nonetheless, securities markets are highly competitive. This article investigates this inherent paradox.
    Original languageEnglish
    Number of pages17
    JournalCapital Markets Law Journal
    Publication statusPublished - 2008

    Open Access - Access Right Statement

    © The Author 2008. All rights reserved

    Keywords

    • behavioural theories
    • capital market
    • efficient market hypothesis
    • securities
    • stockholders

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