The Efficient Market Theory of Share Price Behaviour

Over the past fifteen years there has been a lot of research into the behaviour of share prices. This has largely involved investigating whether share prices were predictable by mechanical means and whether any class of investors has had consistent and substantial success in investment matters. The main researchers involved in these studies have been (a)academics, who were interested in determining the efficiency of stockmarkets in socio‐economic terms and (b) practising investors and investment advisory firms, who sought to derive profitable investment strategies. Perhaps not surprisingly the published results of the two categories of researchers tended to clash with investors claiming success for their methods whilst the academics have in general refuted their claims. Greater reliance can be placed on the academic investigations however as apart from their disinterested positions and their generally superior research methodologies, they have tested all the publicised “profitable” investment strategies.