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Researcher: Rajeshkumar D. Kiri
Guide(s): Dr. Akash B. Patel
University: Ganpat University
Completed Date: 01/03/2017
Abstract: The Efficient Markets Hypothesis (EMH) has been a dominating theory among Economics and financial theories, which suggests that market prices fully reflect all relevant information (Fama, 1970). It has been used widely to theoretical models but empirical studies of equity shares prices show disagreement on fundamental of the price-discovery process (Lo, 2007) as per efficient market hypothesis. The EMH subsequently faced both theoretical and empirical challenges and gradually loses its importance just as other once-fully supported economic theories must encounter at some stage. The assumptions of EMH about the individual investor s behaviour are often called into questions like rationality of individual investors, irrelevance of irrational investors and perfectly working arbitrage. newlineThere is growing body of both theoretical and empirical literature focuses now on testing the role of investor s sentiment and its implication for financial market and organizations. This literature provides evidences of market anomaly like excessive trading volatility, predictability in returns of stock and investor s over or under reaction to corporate announcements. Consequently, contemporary research shifted its focus on exploring drivers of their behaviours and its implication for market efficiency. newlineThe traditional models analyze stock price formation by quantitative and performance related factors but do not consider impact of human behaviour. Hence, the traditional models are not able to explain fully the movement in share prices. It is advocated that the transition in investor s sentiment may offer better justification of short term movements in equity share prices, than any other set of fundamental factors. It is therefore suggested that understanding investor s sentiment would provide a superior explanation of stock price performance. Technical analysis considers that human behaviour has an impact on stock prices but it does not incorporate clear explanation on factors affecting investor s sentiment. Against this backdrop, it
Appears in Departments:Faculty of Management Studies

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