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Write a 10 pages paper on fin65. In order to identify a trend, there is a presumption that more information is always needed. Therefore, from the perspective of herd psychology the behavior inherent i
Write a 10 pages paper on fin65. In order to identify a trend, there is a presumption that more information is always needed. Therefore, from the perspective of herd psychology the behavior inherent in noise trading, as a result of interest in financial noise becomes a predictable consequence of financial markets.
Noise of course in this context refers to low level, seemingly isolated financial trades that may appear to be distinct from large-scale actions by major corporate players. It is logical to suppose that if a trend were to exist, it must do some extent be reflected in noise of transactions at a basal level. However, this contention is theoretically logical – but it also follows that noise transactions would still occur even in the absence of any definitive trend. Yet changes in the market (often dramatic) must inevitably happen, and all parties must identify a bandwagon upon which to place their money if for no other reason than to avoid taking substantial losses, to say nothing of reaping significant profits.
Therefore, it becomes logical for certain individuals to provide a service for those seeking information on noise transactions, and this activity, the emergence of which is arguably a predictable assumption for a financial market exhibits the potential to undermine the efficiency of these markets. To explore this potential conflict, it is necessary to discuss a theory described as the efficient market hypothesis.
The efficient market hypothesis in essence presumes that financial information must invariably spread rapidly within an unrestricted financial market, and therefore changing prices typically with respect to securities must reflect real value based upon the underlying assumptions of the stock market, and in this manner a self regulating mechanism arises by which inefficiencies will be minimized, and eliminated. But the same assumptions that allow analysts to predict reasonable prices could in this instance work against overall market efficiency.
