Sunday, July 25, 2010

Efficient Market Hypothesis(EMH)

It stated that prices reflect all available information.


1. There are a large number of profit-maximising participants concerned with the analysis and valuation of securities and operating independent of each other.

2. New information regarding securities comes to the market in a random fashion and that the announcements over time are generally independent of one another.

3. Investors will the react to adjust security prices rapidly to reflect that effect of new information. As a result, prices will fully reflect all available information. Rational investors immediately exploit any arbitrage possibilities.

For example : A low P/E effect states that there is a tendency for stocks with low price relative to earnings ratio to outperform the market.

TEH : That means that IF market is efficient, the lower P/E stocks SHOULD outperform the markets, in general.

Taken from Fred Tam's : Profitability of TA

IP Man - I watched on DVD last night, a rare activity that I will do.

10.45 am : I will complete my above writing at night, I hope. I m giving tuition now, yes .... Sunday morning!! Well, I will not complain as I still think that I need more tuition classes to increase my income.

4.00 pm : I was searching for a stock to BUY in HKSE tmr ... yes, I have NOT been holding HKSE for some time now, so I look into my old flame, CWP. Hey, there is a change in trend(reversal) at the moment. It is at 0.77-0.78 now. Yes, the reversal was at 0.72-0.73 ... late by few days but at least it is moving uptrend now. But, currently the green-energy sector is NOT in play. Hmm ...

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