DANCEST 805 Lecture Notes - Lecture 19: Idiosyncrasy, Risk Premium, Systematic Risk
Document Summary
Iapm s4: chapter 8 the efficient market hypothesis. Random walk: notion that stock price changes are random and unpredictable if prices are determined rationally, then only new information will cause them to change = natural result. 1. 2 versions of the efficient market hypothesis: versions differ by notions of what is meant by all available information". Semistrong-form emh: assertion that stock prices already reflect all publicly available information (data on firm products, quality of management, balance sheet, patents, etc) Strong-form emh: assertion that stock prices reflect all relevant information, including inside information much of activity of sec is directed toward preventing insiders from profiting by exploiting their privileged situation; distinction between private and inside information is murky. Relative strength approach: ratio of stock price to market indicator such as s&p 500 index: components of technical analysis: resistance levels and support levels.