Question

What exactly does the efficient market hypothesis contend about prices in the stock market and the...

What exactly does the efficient market hypothesis contend about prices in the stock market and the ability for an individual investor to consistently beat the market?

2. What exactly is an asset bubble and what evidence does Thaler provide that a housing bubble was forming starting in 2000?

3. What does Thaler say that he would do if he were in charge of the Federal Reserve and spotted scenarios like Scottsdale and Las Vegas occurring in the market?

4. Does Fama agree with Thalers position from 3?

5. What is one thing that both professors agree on as it relates to the market?

6. After watching the video and looking into the topic more, which economists arguments do you find more persuasive? If the EMH is true, then how do you explain people that successfully play the stock market? This is the name of the video "Are markets efficient". Watch the video and answer the questions.    Please help me please answer the questions please

Homework Answers

Answer #1

Question 1

The theory of efficient market hypothesis states that prices of stocks in the stock market always reflect all the information with respect to such stocks.

Also, every event that can impact stock prices are already accounted for due to the efficiency of stock markets.

So, prices of stocks are already at their fair value and there is neither undervaluation or overvaluation.

Thus, this theory states that an individual investor would not be able to outperform the stock market.

Hence, it is impossible for an individual investor to consistently beat the market.

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