Warning: Use of undefined constant referer - assumed 'referer' (this will throw an Error in a future version of PHP) in /usr/home/essaywo/public_html/essays on line 102

Warning: Use of undefined constant host - assumed 'host' (this will throw an Error in a future version of PHP) in /usr/home/essaywo/public_html/essays on line 105

Warning: Cannot modify header information - headers already sent by (output started at /usr/home/essaywo/public_html/essays:102) in /usr/home/essaywo/public_html/essays on line 106

Warning: Cannot modify header information - headers already sent by (output started at /usr/home/essaywo/public_html/essays:102) in /usr/home/essaywo/public_html/essays on line 109
Efficient Market Theory: A Con - Example Papers

Efficient Market Theory: A Con


According to the Efficient Market Theory, it should be extremely difficult for an investor to develop a "system" that consistently selects stocks that exhibit higher than normal returns over a period of time. It should also not be possible for a company to "cook the books" to misrepresent the value of stocks and bonds. An analysis of current literature, however, indicates that companies can and do "beat the system" and manipulate information to make stocks appear to perform above average. An understanding of the underlying inefficient "human" factors in the market equation is necessary in order to account for the flaw in Efficient Market Theory.
tradiction of Terms
Efficient Market Theory ...

Want to read the rest of this paper?
Join Essayworld today to view this entire essay
and over 50,000 other term papers

However, information technology and market dynamics are based upon the workings of ordinary people and diverse organizations, neither of which are arguably efficient nor consistent. Therefore, we have the basic contradiction of EMT: How can a theory based on objective mechanical efficiency hold up when applied to subjective human inefficiency?
As a case in point, America Online (AOL) offers a classic example of how investors can be misled by a company that uses the market system against itself. AOL, up until early November of this year, used an accounting system that effectively "cooked their books" and provided misleading figures on the company's performance. Instead of accounting for its promotion expenses and costs as a regular expense, as normal companies do, AOL spread them over two years. This let AOL report annual profits based on revenue figures derived from denying actual expenses (as cited in Newsweek, November 11 edition).
By deferring those costs, AOL over the years ...

Get instant access to over 50,000 essays.
Write better papers. Get better grades.


Already a member? Login


CITE THIS PAGE:

Efficient Market Theory: A Con. (2004, October 30). Retrieved March 29, 2024, from http://www.essayworld.com/essays/Efficient-Market-Theory-A-Con/16725
"Efficient Market Theory: A Con." Essayworld.com. Essayworld.com, 30 Oct. 2004. Web. 29 Mar. 2024. <http://www.essayworld.com/essays/Efficient-Market-Theory-A-Con/16725>
"Efficient Market Theory: A Con." Essayworld.com. October 30, 2004. Accessed March 29, 2024. http://www.essayworld.com/essays/Efficient-Market-Theory-A-Con/16725.
"Efficient Market Theory: A Con." Essayworld.com. October 30, 2004. Accessed March 29, 2024. http://www.essayworld.com/essays/Efficient-Market-Theory-A-Con/16725.
JOIN NOW
Join today and get instant access to this and 50,000+ other essays


PAPER DETAILS
Added: 10/30/2004 07:19:58 AM
Category: Miscellaneous
Type: Premium Paper
Words: 738
Pages: 3

Save | Report

SHARE THIS PAPER

SAVED ESSAYS
Save and find your favorite essays easier

SIMILAR ESSAYS
» Free Trade
» Socialism
Copyright | Cancel | Contact Us

Copyright © 2024 Essayworld. All rights reserved