<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The concept of an efficient financial market, in literature known as efficient market hypothesis (EMH), has had a long and difficult development path from the idea itself to its final conception, as one of the central paradigms in modern finance. It has been tested and critically reviewed for decades, and the two basic types of problems it has encountered are theoretical paradoxes and market anomalies. The aim of the paper is to examine the validity of EMH through various financial market efficiency tests and the results of previous research. The intention is to answer the question of whether, despite theoretical paradoxes and market anomalies, the notion of validity can be attributed to the concept of an efficient financial market. In this regard, the paper presents plenty of evidence for and against the validity of weak, semi-strong, and strong form of EMH, to conclude that, even after more than half a century of research, financial literature has not reached a consensus on the presence or absence of the validity of this hypothesis.</p></abstract>

The concept of an efficient financial market, in literature known as efficient market hypothesis (EMH), has had a long and difficult development path from the idea itself to its final conception, as one of the central paradigms in modern finance. It has been tested and critically reviewed for decades, and the two basic types of problems it has encountered are theoretical paradoxes and market anomalies. The aim of the paper is to examine the validity of EMH through various financial market efficiency tests and the results of previous research. The intention is to answer the question of whether, despite theoretical paradoxes and market anomalies, the notion of validity can be attributed to the concept of an efficient financial market. In this regard, the paper presents plenty of evidence for and against the validity of weak, semi-strong, and strong form of EMH, to conclude that, even after more than half a century of research, financial literature has not reached a consensus on the presence or absence of the validity of this hypothesis.

Evidence for and Against the Validity of Efficient Market Hypothesis

Faculty of Hotel Management and Tourism in Vrnjačka Banja

Economic Themes

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"Evidence for and Against the Validity of Efficient Market Hypothesis"}

The concept of an efficient financial market, in literature known as efficient market hypothesis (EMH), has had a long and difficult development path from the...

Evidence for and Against the Validity of Efficient Market Hypothesis

Published Online: Sep 26, 2019

Page range: 369 - 387

Received: May 06, 2018

Accepted: Oct 16, 2018

DOI: https://doi.org/10.2478/ethemes-2018-0022

Keywords
weak-form EMH tests, semi-strong-form EMH tests, strong-form EMH tests

© 2018 Miljan Leković, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Evidence for and Against the Validity of Efficient Market Hypothesis

Published Online: Sep 26, 2019

Page range: 369 - 387

Received: May 06, 2018

Accepted: Oct 16, 2018

DOI: https://doi.org/10.2478/ethemes-2018-0022

Keywordsweak-form EMH tests, semi-strong-form EMH tests, strong-form EMH tests

© 2018 Miljan Leković, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
weak-form EMH tests, semi-strong-form EMH tests, strong-form EMH tests