Investigation of Market Efficiency Stock Market

Question: Discuss about the Investigation of Market Efficiency for Stock Market. Answer: Introduction An Efficient market is one where all the necessary information of companies shares price is disclosed to public for the benefit of investors. The information could be related to finance, political, social or economical that assists in procuring maximum expected return for the investors (Yalcin 2016). There have been three degrees that determine the degree of market efficiency i.e. strong, semi- strong and weak forms. The report presents the comparison between the forms of market efficiency and indications to achieve equilibrium on semi- strong market efficiency. Semi- strong market efficient Semi- strong structure of efficient market hypothesis signifies the efficiency of market that reflects all the information is publicly available. Under this form of market hypothesis it is considered that all the public information can be determined in a securitys current market price. In order to achieve the superior gains on the shares price, fundamental or technical analysis are not required to be used. All the information in semi- strong market is accounted as the shares price for the benefit of investors (Westerlund, Norkute and Narayan 2015). Comparison between weak and strong forms to semi- strong Weak form in the efficient market hypothesis does not assist in predicting the present stock prices based on the past share prices. Weak form of the efficient market focus on the determination of prices through technical analysis as well as independent identification of rates of return (Said and Harper 2015). On the contrary, strong form of efficient market hypothesis reflects efficiency of market since the information on public and private can be determined. It is assumed that the strong form of market efficiency provides all the information about the shares price and therefore investors would not be able to earn profit more than the average rate of return (Potocki and Swist 2015). Considering the market regulations in London, Brexit market the price of equity shares reflected a fall of around ten percent that had a direct affect on the economy. Decline in the exchange rate with respect to the Brexit market resulted in increase of inflation in the economy of the country. However, in case of New York market that has evolved in the financial market over two decades constitutes the most active trading floor with advanced technology and human judgment effort. The stock exchange of New York protects the capital of listed companies and expected return of the investors (Rahmanizadeh and Mahesh 2015). The fall in the financial market in the Brexit period indicated the weak for on market efficient hypothesis that affected the capital benchmark of the listed companies at a rate of 5% - 7% approximately. General Consensus on calling London and New York semi- strong Due to the inefficient financial market during the Brexit period, the investors and companies suffered abnormal returns. Several listed companies planned to delist from the New York Stock Exchange, which reflected fall in exchange rates, equity share prices and capital benchmark (Westerlund, Norkute and Narayan 2015). In the year 2006, certain companies experienced market regression that was influenced by the cross-listing companies to measure the corporate valuation along with the invested capital. Since the semi- strong form of market hypothesis reflects public information for determining the stock prices, New York Stock exchange companies valued their business by using earnings before interest and taxes, amortization and depreciation. Other elements that affected the companies valuations are government practices, liquidity earnings per share, net asset values that varies from country to country (Verheyden, De Moor and Van den Bossche 2015). Requirements to achieve equilibrium and complete semi- strong efficiency It is essential to achieve the equilibrium to the semi- strong form of market efficiency as it reflects all the necessary public information about the companies. Accordingly, the financial markets need to be transparent that reveals public information to determine the stock prices and to earn maximum returns for the benefit of investors. To form a transparency in the financial market for the listed companies, Sarbanes- Oxley Act had been formed to prepare and recognize the companies financial information in transparent, true and fair view (Yalcin 2016). Additionally, complete semi- strong market efficient hypothesis requires the flow of information should be instant and equal with respect to the financial position of the companies, asset valuation and business policies. It is also important for the companies to present and reflect the transactions at true and fair means along with the proper disclosures on each valuation. Further, the companies are required to reflect the sustainability measures and corporate policies to present the complete information for the benefit of investors and to achieve the equilibrium semi- strong market efficient (Rahmanizadeh and Mahesh 2015). Conclusion Considering the given requirements on complete achievement of the semi- strong form of market efficient hypothesis, most of the companies are taking measures on preparing and presenting the financial information in transparent manner. Companies are following the requirements of International Financial Reporting Standards and the stock exchange to provide the complete information to the investors. Organizations have taken step to present the sustainability and corporate governance report to the investors to reveal the necessary measures taken by them for better business operating activities. Reference List Potocki, T. and Swist, T., 2015. Empirical test of the strong form efficiency of the Warsaw stock exchange: the analysis of WIG 20 index shares.South-Eastern Europe Journal of Economics,10(2). Rahmanizadeh, F. and Mahesh, R., 2015. 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