Advanced Financial Management Essay Example | Topics and Well Written Essays - 1000 words

Advanced Financial Management - Essay ExampleImplementation in the efficiency in a grocery proves that it is unable for any investor to beat the market consistently by using a common investment strategy. The expeditious market hypothesis is associated with the idea of a random walk, which is a term loosely used in the finance literature to characterize a toll series where either subsequent price changes represent random departures from previous prices. 3 But even very r bely efficient markets carry a negative implication for the investment strategy. An efficient market does not imply that the stock price shadowernot move away from the true value. Some times in the efficient market the expected eliminate from investment will be consistent with the risk factor. Errors in valuation creates problems in efficient market.An efficient market is described as Informationally Efficient, because the investors can get all the necessary information that reflects within the market like poli tical, economical and social. The paradox of efficient markets is that if every investor believed a market was efficient, then the market would not be efficient because no one would analyze securities. 4 As per behavioral decision theory of Kehneman and Tversky investors decisions are subject to the change of optimism and pessimism. These behavioral changes are reflecting their investment decision. Some investors are over confident they are able to forecast future stock price. 5Share prices are reflected all information about the market so the investors are able to expect their returns and they can easily take decision about their investments. Market may needfully to exist where the investors are unable to earn excess return over a long period. In order to maintain the market in a steadily manner it is essential to undertake the legal barriers about the publication of privatized information. In a weak form of market the prevailing share prices are