The Test of Market Price for Weak Form Efficiency Assignment

The Test of Market Price for Weak Form Efficiency - Assignment Example The presence of the market efficiency in its weak form when looking at historical prices can be explained through varying statistical tests, and the tests are mainly focused on the notion that the investor might repeatedly make more than the standard returns on the knowledge of the historical price patterns (Timmermann & Granger, 2002). To prove the weak form of market efficiency can often be complicated due to the infinite number of methods to predicting the returns in the future, evaluated against the past and present returns (Hamid et al., 2010). It is also crucial to note that there tests that can show efficiency and with the regard to the provided pattern of prices (Teall, 2012). The investor with intricate knowledge of the test that explains the market inefficiency might utilize the knowledge and obtain high returns, more than the face, or alternatively face a market obstacle that blocks the investor from realizing the market efficiency (Botten, 2007). Similarly, tests of effic iency in markets are in reality, the combined tests for the actual inefficiency and a single model that explains the standard profits in an efficient market (Moyer, McGuigan & Rao, 2015). As a result, the market efficiency concept cannot be ignored, unless the investor is aware that the right outlook for standard profits has been chosen for the specific course. Moyer, McGuigan & Rao (2015) perceive the presence of costly information in price patterns that are not normal, and in effect, the market cannot be efficient. Consequently, the best benchmark for tests of efficiency in the market will almost certainly not be hypothetically perfectly efficient. Hence, if the efficiency of the market in its weak form is present, therefore, the current prices shows that past information that contains every information might be analyzed using the price patterns of the past, as well as the trading volume of the stock (Schubert, 2009).