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.
