The Price Is Right?: Has The Financial Crisis Provided A Fatal Blow To The Efficient Market Hypothesis?

Business cycle fluctuations are costly, but they do come with a small upside for economists: they serve as a way to test how well prevailing economic theories hold up to reality. The recent recession is no different. Some have suggested that the long-standing "Efficient Market Hypothesis" (EMH) has been disproved once and for all by the financial crisis. The EMH says that financial market participants act as powerful information gatherers about an asset's "True" value, such that an asset's price will generally reflect all information available about that asset.

Provided by: Federal Reserve Bank of Richmond Topic: CXO Date Added: Feb 2010 Format: PDF

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