Eugene Fama and his Security Prices Theory
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First of all let’s examine whether or not by definition today’s capital markets are efficient. Fama believes that an efficient market is one in which there is an almost free flow of current information. The efficiency of our current market is questionable at best. While Enron was sinking its shareholders were not given current accurate information pertaining to the financial state of the company. Another aspect of this inefficiency is that the market will make decisions based on what has already occurred or what may occur in the future.