Appling the EMH evaluate the role that government played in economic Essay

Appling the EMH evaluate the role that government played in economic recovery using recent real-life examples - Essay Example Aim and objectives of the study The theme around which the discussion will tend to revolve is of efficient market hypothesis under the intervention of the government. The hit of the financial crisis has left many countries under the scanner and so the usefulness of the study cannot be underestimated. Enormous scope of the study is waiting in the background as it is extremely important to understand or analyze the intervention of the government in detailed manner in this volatile scenario. The study will take into consideration or will try to consider the various policies of the government which will determine the scope of legislation on efficiencies of the market in the near future. The present times has witnessed gradual instability in the market due to the imposition of the different market policies of the government and would provide an opportunity of learning in the current scenario. Efficient market hypothesis The efficient market hypothesis implies that if any new form of information is available in the market the share price of the company will move accordingly and the movement of the price will be rational according to the information available in the market. In this type of market no trader will have an opportunity to earn profits which is above the normal level on the return from a share greater than the fair return from the associated risk. The chance of absence of normal profits arises as the past or the future information is reflected in the current prices of the shares. The availability of new information in the market has the ability to affect the prices of the shares (Palan, 2007, p. 3). ... icient market hypothesis implies that if any new form of information is available in the market the share price of the company will move accordingly and the movement of the price will be rational according to the information available in the market. In this type of market no trader will have an opportunity to earn profits which is above the normal level on the return from a share greater than the fair return from the associated risk. The chance of absence of normal profits arises as the past or the future information is reflected in the current prices of the shares. The availability of new information in the market has the ability to affect the prices of the shares (Palan, 2007, p. 3). The hypothesis is concerned in analysing the conditions under which an investor can earn abnormal profits from investing in a stock. It claims that the relevant information is reflected in the stock price. It states that abnormal returns cannot be availed with only public information. People are of the opinion that efficiency means that it is not possible to outperform the market at a certain point of time. It can be expected that under certain points of time the prices will deviate from the fair value as it majorly depends on the unpredictable future. It does not mean that an investor will not be able to beat the market scenario at any time. In the market which is efficient one half of the purchased shares subsequently outperform as the process tend to deviate randomly (Harder, 2010, p.7). Adoption of particular investment strategy in the long run can contribute to beat the market situation. It may be possible to find few investors who have beaten up the market scenario in a completely efficient market with price deviating from the true value. The laws of probability have the central