American Financial Market Efficiency Pre and Post Internet Adoption
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Authors
Tabenske, Tyler
Issue Date
2013
Type
Thesis
Language
en_US
Keywords
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Abstract
The Efficient Market Hypothesis (EMH) has been a topic of intrigue to· investors
since gaining traction in the early 1970s. One assumption of the strong-form EMH is the
idea of perfect information- that prices of assets fully reflect all public and private
information. Beating the market should be a 50/50 shot.
Examining the returns of Berkshire Hathaway are telling: beating the market 39
times out of the past 48 years certainly doesn't seem to be by chance at all .. Over this long
period of time, the EMH fails to explain the returns of investment firms like BRKA's.
This fails to take into account many factors though: namely technology. The advent of
the internet completely changed financial markets, as it allowed for quick and easy access
to information that once took hours of research.
The result: a massive difference in BRKA's returns pre and post 1995 :-the year
the internet was released to the public. Statistical analysis in R reveals the significance of
this difference from the EMH. Also, theoretical markets of 2001, the year internet
adoption in the U.S. hit 51% and 1981, two decades earlier, are analyzed to· look for
further trends to reinforce findings.
Description
iv, 45 p.
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License
U.S. copyright laws protect this material. Commercial use or distribution of this material is not permitted without prior written permission of the copyright holder.