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Investing with Ben Graham: An Ex Ante Test of the Efficient Markets Hypothesis

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  • Oppenheimer, Henry R.
  • Schlarbaum, Gary G.

Abstract

In an efficient capital market, prices fully reflect available information and adjust to new information in a rapid and unbiased fashion. As a result, prices provide unbiased estimates of the underlying values. No known trading rule or security selection strategy which uses only publicly available information would provide an investor with the ability to earn, on average, positive “abnormal” returns in a market that is efficient in the semi-strong sense. Thus, a finding that common stocks selected, using a readily available, widely disseminated set of rules which requires only publicly available information for decision-making purposes, earn, on average, positive abnormal returns represents strong contradictory evidence regarding the semi-strong form of the efficient markets hypothesis.

Suggested Citation

  • Oppenheimer, Henry R. & Schlarbaum, Gary G., 1981. "Investing with Ben Graham: An Ex Ante Test of the Efficient Markets Hypothesis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(3), pages 341-360, September.
    • Handle: RePEc:cup:jfinqa:v:16:y:1981:i:03:p:341-360_00
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    Cited by:

    1. Nadisah Zakaria & Fariza Hashim, 2017. "Emerging Markets: Evaluating Graham's Stock Selection Criteria on Portfolio Return in Saudi Arabia Stock Market," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 453-459.
    2. Farias Nazário, Rodolfo Toríbio & e Silva, Jéssica Lima & Sobreiro, Vinicius Amorim & Kimura, Herbert, 2017. "A literature review of technical analysis on stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 115-126.
    3. Jaspal Singh & Kiranpreet Kaur, 2014. "Testing Ben Graham’s Stock Selection Criteria in Indian Stock Market," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 39(1), pages 43-62, February.
    4. Enrique Rafael González Pozo, 2020. "An Argument Against Stock-Picking and Market-Timing: An Empirical Approach," Investigación & Desarrollo, Universidad Privada Boliviana, vol. 1(1), pages 93-106.
    5. Safdar, Irfan, 2016. "Industry competition and fundamental analysis," Journal of Accounting Literature, Elsevier, vol. 37(C), pages 36-54.

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