Efficient market hypothesis for stock market

I agree.

Stock markets are presumed to be efficient, though insider trading and other criminal activities reduce the purported efficiency.

Well, there are three forms of efficient market hypothesis EMH the weak form, the semi strong and the strong form. Many studies suggest that Stock market are efficient or weak form of ( means the history of the prices repeat itself) thus, technical analysis sometimes works for prediction movements. Others, however suggest that stock market is efficient therefore no arbitrage opportunities exist

It all depends on the underlying assumptions.

Stock markets adjust themselves in the changing market dynamics and in the long run attains its own stability.

I propose the following proposal for a research topic in this area:

Why is the importance of the correlation analysis between the stock market valuation and the economic situation of business entities growing?

Why is the importance of analyzing and conducting research on the correlation between the stock market valuation of securities (stocks, bonds, etc.) and the economic and financial situation of business entities growing?

In recent years, the importance of examining the correlation between stock market valuation of securities (stocks, bonds, etc.) and the economic and financial situation of business entities is growing, because there are more and more anomalies and speculations on capital markets, which may reduce these correlations. The importance of studying this issue is growing particularly when in certain listed markets valuations of certain financial assets and instruments are less and less related to economic fundamentals and the significance of speculation is growing. If such a lack of correlation between the stock market valuation and the economic and financial situation of business entities is growing, then the financial and / or economic crisis may occur. Such a situation of increase in speculative factors on stock exchanges and commodity exchange commodity markets appeared in 2006-2008 and contributed to the global financial crisis in 2008.

Do you agree with me on the above matter?

In the context of the above issues, I am asking you the following question:

Why is the importance of analyzing and conducting research on the correlation between the stock market valuation of securities (stocks, bonds, etc.) and the economic and financial situation of business entities growing?

Please reply

I invite you to the discussion

Thank you very much

Best wishes

Dear Prof. Prokopowicz,

It is a very good question to ask I feel as to whether Rational ExpectationsEquilibrium applies to stock exchange markets, because there isn't much literature apart from Prof. Lucas's (1972) paper on Asset Prices in an Exchange Economy in Econometrica. We have carried out a Dynamic Asset Pricing model with Asset Management control variables in an industrywide ten year Rational Expectations model with corporate finance and banking and monetary policy variables (Mallick, Sarkar, Roy, Duttachaudhuri & Chakraborty (2007)) and derived the rational espectations information technology driven Econophysical equilibrium properties using the Haag Theorem derived (Mallick (1993, 2008))low dimensional partitioning of the information-energy network computationally isotropic to the rational expectations meanfield with various cybernetic physical properties in spacextime, Navier-Stokes stock and flow RHMHM School Dbranes String Functor-Algebra-Calculus (Mallick, Hamburger & Mallick (2016, 2017, 2018)) particle stock and flow systems equilibrium (experimentally verifying the Proof of the Navier Stokes equations in AGGNNNetworks Mallick, Hamburger & Mallick (2016, 2017, 2018)). What we have discovered in the process among a number of things including the new laws of Econophysics which such systems follow is that the Digital Asset Management Natural Systems Econophysics which forms the Econophysical market microstructure of such markets exists. This actually follows Prof. Samuelson's 1960 paper in the Journal of Business of the Brownian Motion model of stock market prices and the corresponding electronic structure fundamental physics using string theory which we have discovered. Sorry for such a roundabout explanation.

Soumitra K. Mallick

for Soumitra K. Mallick, Somak Raychaudhury, Sandipan Mallick and others

of The RHMHM School,

USA, Japan, Russia, India.

Dear Qays Sbaih, Michael John McAleer, Qays Sbaih, Deepak Sahni, Soumitra K Mallick, Thank you very much for your answer and participation in the discussion. Thank you for an inspiring, interesting and substantively rich answer.

Best regards, Have a nice day,

Dariusz Prokopowicz

Dear All,

In connection with the above, I am asking you to answer the following question: Have you noticed that in 2020 the situation on the stock markets shows the picture of the economy in what time (from a few weeks to several months)? Does the stock exchange show a picture of the economy after the development of the SARS-CoV-2 (Covid-19) coronavirus pandemic in advance (from a few weeks to several months)?

Dear Colleagues and Friends from RG, Please reply

What do you think about it?

Thank you very much and best regards,

Dariusz Prokopowicz

It is very interesting issue, in the year of 2020( during COVID-19) the Indian stock market was very much efficient. At least statistical calculations ( daily closing price of representative stocks for each quarter) have justified this phenomenon.

Apart from this, I have one observation regarding stock market research. During last two decades at the advent of sophisticated statistical software , huge number of research articles have been published by different researchers. Most of them were busy to assess the stock market volatility. The volatility reassessment, estimation of stock prices - all are based on the numerous assumptions. Most of the articles have developed different models on the basis of those assumptions. If any one can discover a real model, he or she will be the trillionaires and will become real hero in todays world. Therefore, it is clear that the statistician who can use the sophisticated statistical software to model the stock market would be the trillionaires. But in reality it is not happening. It means the this research does not have any practical implications. So I humbly request all the stock market researchers to pay attention on this serious issue while modeling the situation otherwise the research articles will be piling up in the dustbin.

effectiveness in explaining excess returns...CAPM has been prevalently used by practitioners for calculating required rate of return despite having drawbacks. Fama French presented their 3 factor model in order to gap the limitations posed by CAPM model....Sattar, M. (2017). CAPM Vs Fama-French three-factor model: an evaluation of effectiveness in explaining excess return in Dhaka stock exchange. International journal of Business and Management, 12(5), 119.

aspects of investors' rationality...Mushinada, V. N. C., & Veluri, V. S. S. (2019). Elucidating investors rationality and behavioural biases in Indian stock market. Review of Behavioral Finance.

Degree of market efficiency...Woo, K. Y., Mai, C., McAleer, M., & Wong, W. K. (2020). Review on efficiency and anomalies in stock markets. Economies, 8(1), 20.

Effects of high-frequency trading...Balp, G., & Strampelli, G. (2018). Preserving capital markets efficiency in the high-frequency trading era. U. Ill. JL Tech. & Pol'y, 349.