The Criticisms of Efficient Market Hypothesis

The Criticisms of Efficient Market Hypothesis:

PART: 6

ü  At the beginning of the criticism, the future investor’s expectations have come to be homogenous in the market.

ü  The reason for the basic of the homogeny situations, all investors have same expectations.

ü  It is impossible that all the investors have the same expectations. If we assume that this is the case, different financial assets in the market can not be considered.

ü  A certain transaction value in the firm, it has to be accepted that investors do not have the homogenous expectations.

ü  Another criticism for Efficient Market Hypothesis is that it is related assumption to investment decisions of investors who have the rational knowledge.

ü  Rational assumption expectations have been criticized by many economists and all the investors don’t have the same function with rational motivations in the market.

ü  Heterogenic expectations principles are alternatively created instead of rational expectation theory. According to this principle, the future expectations of investors have to be different and away from the rationality.

ü  Efficient Market Hypothesis does not fully explain the functioning in today’s market. Nevertheless, it gives an information that how today’s market is away from the optimal situation.