Corporate Finance (see questions) Essay Example | Topics and Well Written Essays - 3000 words

Corporate Finance (see questions) - Essay Example Bergen (2004) noted about the important debate among stock market investors is whether the market is efficient. Market efficiency here means that all the information are made available to market participants at any given time. Hence the announcement of new technology by the company director in the above case as to the influence on stock prices has almost become immaterial. The efficient market hypothesis (EMH) theory forwards the idea that all stocks are perfectly priced according to their inherent investment properties, and that the knowledge for decision making are made available to all market participants possess equally. One argument against the theory is on its assumption as in the case of believing that that all investors perceive all available information in precisely the same manner. This could he hard to be believed because there are many methods for analyzing and valuing stocks and these may in a sense pose some problems for the validity of the model. If one person may see undervalued market opportunities, it is equally possible to have another person on the basis of growth potential. In other words, the availability of information may still means different things for difference people. Thus under the case, two investors may come to arrive at a different assessment of the stock’s estimated fair market value. Will this reality therefore not create variability in the result? (Bergen, J. 2004). If this argument is sustained it must also sustained that with or without the EMH theory, the differences in investor’s perception and attitude will still be there. Another criticism of the efficient market hypothesis is that, it implies that there is no single investor that will be ever able to get greater profitability than another with the same amount of invested funds. In other words, there is an assumed equal possession of information means that should make the investors