Weak Form of Efficiency of Stock Market: A Review of Literature

Abstract

The temptation of earning big money has always thrown investors into the lap of stock markets. However, investing and making money in equities is not simple. It requires lots of patience and discipline with great deal of research and a sound understanding of the market, among others. The concept of Efficient Market Hypothesis (EMH) is related to the research and return one can earn from investing in stock market. The meaning of Efficient Market Hypothesis is that the stock prices already reflect all available information so one cannot make any extraordinary profit with any different strategy. However, there are some other concepts like calendar effect, weekend effect which negates EMH. The simple meaning EMH is type of information and discounting of the same in stock market. EMH basically focuses on three types of information i.e. Past Information, Present Information and Insider Information. In this study, the research papers related to past information are reviewed. This study, which is qualitative in nature, intends to explain the movement of stock prices with respect to arrival of past information. The study is not limited to Indian stock market and we have tried to cover research papers from various countries. After reviewing 50 papers, it is concluded that majority of stock market are not weak form of efficient.

Keywords: Stock Market, EMH, Past Information