Market Efficiency Contradicts the Usefulness of Annual Reports?
Market Efficiency
Contradicts
the Usefulness of Annual Reports?
One speech, Mr Right presented that the market was efficient in the semi-strong form as investors had no benefit in the disclosure of enterprises financial reports, due to the information included in those reports was the past information with share prices. Therefore, the usefulness of financial reporting to share purchasers and sellers was invalid during their decision making, so there were unnecessary for an investor to study financial reports and accounts of companies.
I. Capital Market Efficiency & Efficiency Market Hypotheses (EMH)
Capital Market Efficiency is the level, to which stock price rapidly and rationally reflects all the available, relevant information, so that it brings the functions of encouraging share buying by the investors if accurate pricing shown in the share market, giving accurate alerts to the directors as the efficient share market reflects the share price which rationally represents the business situation, also assisting the resources allocation to ensure the funds become the most efficient beneficial for the company.
The efficient-market hypothesis (EMH) formed by Eugene Fama, an American economist, at 1970, is supporting the stock market is “informationally efficient”. Basically, there are three forms of hypotheses.
The weak form EMH states that the current stock prices reflect all the past information movements. It means that the market in weak form EMH is not able to predict the future price cause of past information contained in the current stock price.
The semi strong form EMH states that all disclosed available information is fully reflected into the current market price. It means the market is more efficient and reliable than which in weak form EMH, as the public information stated not only past prices movement but also information reported in the company 's financial statements, announcement, economic factors, etc. Therefore, the future
Contradicts
the Usefulness of Annual Reports?
One speech, Mr Right presented that the market was efficient in the semi-strong form as investors had no benefit in the disclosure of enterprises financial reports, due to the information included in those reports was the past information with share prices. Therefore, the usefulness of financial reporting to share purchasers and sellers was invalid during their decision making, so there were unnecessary for an investor to study financial reports and accounts of companies.
I. Capital Market Efficiency & Efficiency Market Hypotheses (EMH)
Capital Market Efficiency is the level, to which stock price rapidly and rationally reflects all the available, relevant information, so that it brings the functions of encouraging share buying by the investors if accurate pricing shown in the share market, giving accurate alerts to the directors as the efficient share market reflects the share price which rationally represents the business situation, also assisting the resources allocation to ensure the funds become the most efficient beneficial for the company.
The efficient-market hypothesis (EMH) formed by Eugene Fama, an American economist, at 1970, is supporting the stock market is “informationally efficient”. Basically, there are three forms of hypotheses.
The weak form EMH states that the current stock prices reflect all the past information movements. It means that the market in weak form EMH is not able to predict the future price cause of past information contained in the current stock price.
The semi strong form EMH states that all disclosed available information is fully reflected into the current market price. It means the market is more efficient and reliable than which in weak form EMH, as the public information stated not only past prices movement but also information reported in the company 's financial statements, announcement, economic factors, etc. Therefore, the future
Bibliography: http://thesistown.com/data/ResProp.pdf (2 July 2011). (3 July 2011) HAH, Alvin, (2001) http://www.alvinhan.com/Efficient-Market-Hypothesis.htm (2 July 2011) (4 July 2011) ‘(n.d.) http://hubpages.com/hub/Which-Accounting-Data-Investors-or-Buyers-Look-For-In-An-Annual-Report (10 July 2011)