Test of Market Efficiency
1. Introduction
A well organized financial system can help any country to have a success economic development. And the well organized financial system also affects the market efficiency. Eugene Fama (1960) classifieds the market efficiency into three categories:
1> Weak Form of efficiency: if current stock prices reflect all the information that from market transaction data, this capital market will be regard as weak efficiency. 2> Semi Strong Form of efficiency: if the current stock prices not only reflect the all the information include historical prices but also all the information that are publicly available about the companies being studied. Besides the historical information, the public information also includes the fundamental data about company production, balance sheet, earnings forecast and some accounting information. 3> Strong Form of efficiency: if a stock price reflects all the information whether it is public or private (insiders’ information), the capital market is strong efficiency.
I choose Domino’s pizza, Carnival Corporation and Intercontinental Hotels Group from London Stock Exchange and collect the three companies’ share prices in three different 15 days. Meanwhile, the London Stock market prices in the three different periods are also collected. The London Stock Exchange is a stock exchange located in the City of London, London, United Kingdom. The Exchange is the fourth-largest stock exchange in the world and the biggest in Europe.
This report is testing the efficiency of London Stock market through a series of calculation of three companies’ share price. And these three companies are Domino’s pizza, Carnival Corporation and Intercontinental Hotels Group which are selected from London stock exchange. In this report, I will state my analysis methodology. In the second part, I will analysis the results that I calculated before to test the London Stock Exchange efficiency. In the conclusion part, the comparison
A well organized financial system can help any country to have a success economic development. And the well organized financial system also affects the market efficiency. Eugene Fama (1960) classifieds the market efficiency into three categories:
1> Weak Form of efficiency: if current stock prices reflect all the information that from market transaction data, this capital market will be regard as weak efficiency. 2> Semi Strong Form of efficiency: if the current stock prices not only reflect the all the information include historical prices but also all the information that are publicly available about the companies being studied. Besides the historical information, the public information also includes the fundamental data about company production, balance sheet, earnings forecast and some accounting information. 3> Strong Form of efficiency: if a stock price reflects all the information whether it is public or private (insiders’ information), the capital market is strong efficiency.
I choose Domino’s pizza, Carnival Corporation and Intercontinental Hotels Group from London Stock Exchange and collect the three companies’ share prices in three different 15 days. Meanwhile, the London Stock market prices in the three different periods are also collected. The London Stock Exchange is a stock exchange located in the City of London, London, United Kingdom. The Exchange is the fourth-largest stock exchange in the world and the biggest in Europe.
This report is testing the efficiency of London Stock market through a series of calculation of three companies’ share price. And these three companies are Domino’s pizza, Carnival Corporation and Intercontinental Hotels Group which are selected from London stock exchange. In this report, I will state my analysis methodology. In the second part, I will analysis the results that I calculated before to test the London Stock Exchange efficiency. In the conclusion part, the comparison