Advanced Portfolio Management Research Paper Example | Topics and Well Written Essays - 3750 words

Advanced Portfolio Management - Research Paper Exampleeffective market hypothesis works on the assumption that on the average the investors have rational expectation. With on tap(predicate) in inningation individual investors reactions are random and follow a normal distribution pattern. This in turn implies that no individual investor can outperform the market on a consistent basis. undivided investors may over or under react individual investors may outperform or underperform for a short period. But all the deviations are random in nature and will self-correct in a short period. Thus market will always be right (Copeland and Weston, 1988). Among the three forms of efficiency, the sapless form efficiency hypothesizes that the current market price does not reflect fair value and solely reflects the past prices. Since it does not adapt to a change in current information, the future price cannot be predicted from past or current prices.Empirical evidence does not always support rac hitic form efficiency of a market. There have been noted differences between line of reasoning market behavior in developed and developing countries. However research findings in different markets are not universally genuine (Elango & Hussein, 2010). Many comparative studies have been done to examine performances of many different stocks and variables results have been observed (Solink, 1973 Cooper, 1982 Urrutia, 1995 Dahel & Laabas, 1999 Rao & Shankaraiah, 2003). To equal the performance of stock markets in a rapidly changing economic scenario worldwide, it was decided to check for weak form efficiency in two developed countries and in two countries belonging to Gulf Co-operation Council for a considerably long period of time in very recent past. Four countries, the names of their stock indices considered and time periods chosen given below. Every week trades take place on 5 days of the week and the other two days are excluded from the analysis. However, given that the countrie s have different customs,