ABSTRACT

The last chapter has overviewed the efficient market theory and the importantly historical evidences generated in empirical studies. The primary arguments of the theory can be statistically formulated in a manner whereby the statistical properties of stock prices and returns in an efficient market differ from that of an inefficient market. Martingale and fair game models have been frequently used to represent the conditions of an efficient market in the literature. However, in an efficient market, consideration of which stochastic process (price, return or abnormal return) is martingale and what stochastic process is a fair game needs further discussion.