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A Critical Survey on Efficient Market Hypothesis (EMH), Adaptive Market Hypothesis (AMH) and Fractal Markets Hypothesis (FMH) Considering Their Implication on Stock Markets Behavior

Author

Listed:
  • Cristi Spulbar

    (University of Craiova)

  • Ramona Birau

    (University of Craiova)

  • Lucian Florin Spulbar

    (University of Craiova)

Abstract

The fundamental objective of our research study is to provide a critical analysis on Efficient Market Hypothesis (EMH), Adaptive Market Hypothesis (AMH) and Fractal Markets Hypothesis (FMH) considering their impact on stock markets behavior. Efficient Market Hypothesis is one of the pillars of modern finance and it is built on the paradigm that any publicly information can be considered as available for all financial investors, stock market participants or other actors in financial markets, and consequently asset prices always integrate and reflect all relevant information. Adaptive Market Hypothesis is based is a more recent theory whose theoretical architecture includes evolutionary principles. On the other hand, the Fractal Market Hypothesis is focused on the concept of the stock market liquidity, considering the fact that Efficient Market Hypothesis completely ignores this major aspect. Moreover, a liquid stock market represents a stable market which has significant implications at the investment level. Past financial evidence has shown that short-term price changes exhibit the obvious tendency to be more volatile compared to longterm price trends.

Suggested Citation

  • Cristi Spulbar & Ramona Birau & Lucian Florin Spulbar, 2021. "A Critical Survey on Efficient Market Hypothesis (EMH), Adaptive Market Hypothesis (AMH) and Fractal Markets Hypothesis (FMH) Considering Their Implication on Stock Markets Behavior," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1161-1165, December.
    • Handle: RePEc:ovi:oviste:v:xxi:y:2021:i:2:p:1161-1165
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Efficient Market Hypothesis (EMH); Adaptive Market Hypothesis (AMH); Fractal Markets Hypothesis (FMH); stock market; Random Walk Hypothesis (RWH); chaos theory;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G1 - Financial Economics - - General Financial Markets
    • G4 - Financial Economics - - Behavioral Finance

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