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The nature and extent of our knowledge of stock market efficiency are examined. The development of “efficiency”, as a way of thinking about stock markets, is traced from Roberts (1959) and Fama (1965) onward. The early work successfully introduced competitive economic theory to the study of stock markets and paved the way for a flood of empirical research on the relation between information and stock prices. This literature irreversibly altered our views on stock market behavior. The theory and evidence of seemingly‐rational use of information lay in sharp contrast to prior beliefs. It was associated with a widespread increase in respect for stock markets, financial markets, and markets in general, at the time. Researchers began developing and using a variety of formal models of security prices. Nevertheless, “efficiency” has its limitations, both theoretically (as a way of characterizing markets) and empirically (by stretching the quality of the data, the estimation techniques used, and our knowledge of price behavior in competitive markets). Extensive evidence of anomalies suggests either that the market systematically misprices securities or that the theoretical or empirical limitations are binding, or both. The less interesting research question now is whether markets are efficient, and the more interesting question is how we can learn more about price and transactions behavior in competitive stock markets. The concept of an “efficient stock market” has stimulated both insight and controversy since Fama (1965) introduced it to the financial economics literature. As a construct, “efficiency” models the stock market in terms of the reaction of prices to the flow of information. Like all theory choices, modelling the market in this fashion involved tradeoffs. The benefits included opening the literature to an abundance of high‐quality researchable data, covering a variety of information, and the resulting insights obtained on the role of information in setting prices. The opportunity costs included temporarily closing the literature to alternative ways of viewing stock markets, for example by modelling public information as a homogenous good and thus ignoring factors such as differences in beliefs among investors, differences in information processing costs, and the “animal spirits” that might drive group behavior. The costs also included reliance on particular asset‐pricing models of how an “efficient” market would set prices. Not surprisingly, the ensuing deluge of research has produced some startling evidence, for and against the proposition that financial markets are “efficient”. Strongly‐conflicting views and puzzling anomalies remain. The early evidence seemed unexpectedly consistent with the theory. The theory, and its implications, also seemed clear at the time. After a period that seems short in retrospect, the growing body of evidence in favor of the efficient market hypothesis emerged as one of the most influential empirical areas of economics. Fama's (1970) review described a flourishing, coherent and confident literature. This research had an irreversible effect on our knowledge of and attitude toward stock markets, and financial markets generally. It coincided with an emergence of interest in, and respect for, all markets among economists and politicians, and influenced the worldwide trend toward “liberalizing” financial and other markets. The research consistently appeared to show an unbiased reaction of stock prices to public information. The property of “unbiased reaction” to public information, which formed the basis of the early definitions of “efficiency”, was seen to be an implication of rational, maximizing investor behavior in competitive securities markets (Fama 1965, p.4). Reduced to a basic level, the reasoning was that any systematicallybiased reaction to public information is costlessly publicly observable, and thus provides pure profit opportunities to be competed away. Characterizing the market in terms of its reaction to information is only one of many feasible ways of modelling stock price behavior, but it introduced economic theoryto the empirical studyof stock prices, which had received little serious attention from economists prior to that point. Despite the subsequent spate of anomalies, the early efficiency literature not only adapted standard economic theoryto provide the first formal economic insights into how stock prices behave, but it helped pave the way for an outporing of theoretical and empirical work on stock markets and capital markets in general. Subsequent empirical research was not as consistent with the theory. Evidence of “anomalous” return behavior now is widespread and well‐known. It generallytakes the form of variables (for example, size, day‐of‐the‐week, P/E ratio, market/book value ratio, rank of scaled earnings change, dividend yield) that are significantly but inexplicablyrelated to subsequent abnormal stock returns. Much of this evidence has defied rational economic explanation to date and appears to have caused many researchers to strongly qualify their views on market efficiency. Disagreement has not been not confined to the evidence. The literature has produced a variety of research designs, ranging from the “market model” of Fama, Fisher, Jensen and Roll (FFJR, 1969) to Shiller's (1981a,b) variance‐bounds tests. The very term “efficiency” has engendered controversy: there is a modest literature on precisely what efficiency means, on the role of transaction costs, and on whether efficient markets are logically feasible. Making sense of this literature requires careful definition of “efficiency” in this context and careful analysis of the type of evidence that has been offered in relation to it. This involves an assessment of the strengths and weaknesses of both the theory of efficient markets, as a way of characterizing stock markets, and of the data and research designs used in testing it. Not surprisingly, a mixed conclusion emerges. While the concept of efficient markets was an audacious departure from the comparative ignorance and suspicion among economists of stock markets that preceded it, and provides valuable insights into their behavior, the concept has its limitations, in terms of both its internal logical coherence and its fit with the data. Section 1 ofthis survey sketches the development of the efficient market theory, reviewing the principal contributions in terms of their usefulness in guiding and evaluating empirical research. Section 2 addresses the limitations inherent in what is knowable about stock market efficiency, given the present state of theory about how security prices might behave in an “efficient” market. It argues that there are binding limitations in the theoryof asset pricing, some of which are known and others of which are unknown or even unknowable. These limitations must be borne in mind when choosing whether to interpret the data as evidence of: (1) market efficiency, under the maintained hypothesis that a specific research design, including a specific model of asset pricing used to benchmark price behavior, correctly describes pricing in an efficient market; or (2) the ability of our models and research designs to encapsulate how prices behave in an efficient market, under the maintained hypothesis of efficiency. Against this background, section 3 then provides an assessment of the accomplishments of the theory of stock market efficiency, including an interpretation of the evidence. It focuses on the nature and influence of the evidence and does not attempt to provide a comprehensive literature taxonomy. The final section offers conclusions. The principal conclusion is that the theory of efficient markets has irreversibly enhanced our knowledge of and respect for stock markets (and perhaps for all financial market or even for markets in general) but that, like all theories, it is fundamentally flawed.

Prior research on the structure‐performance relationship has not investigated all of the relevant relationships among market structure, profits, prices, and explicitly calculated measures of firm efficiency. This paper replicates the four approaches in the literature, adds several innovations, and applies the analysis to banking data. We find more support for the structure‐conduct‐performance hypothesis than for the relative‐market‐power and efficient‐structure hypotheses, although the data are not fully consistent with any of these theories. We also find support for Hick's quiet‐life hypothesis, which implies that firms with market power adhere less rigorously to efficiency maximization. J.E.L. Classification Numbers G21, G28, L41, L89 The opinions expressed do not necessarily reflect those of the Board of Governors or its staff. The authors thank Dean Amel, Jim Berkovec, Myron Kwast, Nellie Liang, LenNakamura, Steve Rhoades, and participants in the meeting of the Federal Reserve System Committee on Financial Structure and Regulation for helpful comments, and Ken Cavalluzzo, Jalal Akhavein, John Leusner, and Seth Bonime for outstanding research assistance.

Summary The ability of valuers to correctly assess available information and impound it into valuations is essential for the operation of an efficient property market. If valuers are doing a good job then they will take into consideration that information which is relevant to the type of valuation being undertaken. In this sense the market is efficient. No market is, however, completely efficient otherwise it would be impossible to earn abnormal returns. There is, therefore, sufficient incentive for investors to acquire costly information in order to improve performance. These issues are central to understanding the role of valuation models and clearly point to the need to improve both the collection and economic interpretation of information.

The purpose of this paper is to determine the market‐value relevance of frontier efficiency scores and to test hypotheses from corporate control and production theory by analyzing the market response to US property–liability (P–L) insurer acquisitions and divestitures.

Cost and revenue efficiencies are estimated based on accounting data for US P–L insurers using data envelopment analysis. The market‐value response to acquisitions and divestitures is estimated using a standard market model event study. Regression analysis is used to measure the relationship between abnormal returns (dependent variable) and efficiency (independent variable), along with a set of control variables.

The results show that acquirers, targets and divesting firms all have significant positive abnormal returns around announcement dates. We also find that efficient acquirers and targets have higher cumulative abnormal returns (CAR) but inefficient divesting firms have higher CARs.

The findings are consistent with insurance acquisitions and divestitures being driven primarily by value‐maximizing motivations, consistent with corporate control and production theory.

Frontier efficiency scores based on accounting data provide value‐relevant information for insurance managers.

This is one of only a few papers that relate frontier efficiency to market values and is the first paper to do this for the insurance industry. It is also one of only two existing papers that analyze the value relevance of efficiency scores in the context of mergers and acquisitions.

Sees the objective of teaching financial management to be to help managers and potential managers to make sensible investment and financing decisions. Acknowledges that financial theory teaches that investment and financing decisions should be based on cash flow and risk. Provides information on payback period; return on capital employed, earnings per share effect, working capital, profit planning, standard costing, financial statement planning and ratio analysis. Seeks to combine the practical rules of thumb of the traditionalists with the ideas of the financial theorists to form a balanced approach to practical financial management for MBA students, financial managers and undergraduates.

The purpose of this study is to empirically examine the efficiency of Greek fixed-odds (offline) betting market as offered by OPAP for the period 2016–2019.

Using a four-year data sample of OPAP's opening and closing odds for football matches from all over the world and applying linear probability and probit models, the market efficiency is examined and the existence of possible anomalies is investigated.

The main findings of research suggest that although the odds are dominated primarily by favorite-longshot bias and secondarily by draw bias, this mispricing cannot prove profitable. However, the opening odds, the margin levels and the market structure provide information that is not fully captured by the closing odds, giving bettors profit opportunities. Thus, findings show that the semi-strong market efficiency is questionable. Finally, competition reduces commissions leading to more efficient odds.

The conclusions of this study are useful for football betting market and, particularly, for government authorities, bookmakers and bettors. Findings can be extended in future research to prediction tasks.

To the best of the authors’ knowledge, this is the first study about the Greek football betting market. The contribution to the literature lies on the one hand in the examination of a monopolistic land-based betting market, which is being squeezed and threatened by the more competitive online betting market, and on the other hand in the simultaneous examination of the opening and closing odds.

The main purpose of this study is to use the Sharpe Ratio to test the efficient market hypothesis for different market capitalization and investment styles of mutual funds. The results of the study for the entire period of 1994‐2007 as well as the two subperiods (1994‐1999 and 2000‐2007) indicate that small cap funds have provided the highest risk‐adjusted return for the entire period whereas growth funds have exhibited lower returns. The findings, therefore, suggest that the mutual funds market is not always efficient, which makes it possible for an investor or a mutual fund manager to earn excess return on a risk‐adjusted basis.

The authors’ goal is to provide an overview and historical context for the various alternatives to the efficient market hypothesis (EMH) that have emerged over time. The authors found eight current alternatives that have emerged to address the EMH's flaws. Each of the proposed alternatives improves some of the assumptions made by the EMH, such as investor homogeneity, the immediate incorporation of information into asset values and the inadequacy of rationality to explain asset prices.

To come up with the list of studies relevant to this review article, the authors used three databases, namely Scopus, Web of Science and Google Scholar. The first two were mostly used to get peer-reviewed articles while Google Scholar was used to extract articles that are still work in progress. The following words were used as the search queries; “efficient market hypothesis” and “alternatives to the efficient market hypothesis”.

The alternatives to the EMH presented in this article demonstrate that market efficiency is a dynamic concept that can be best understood with a multidisciplinary approach. To better comprehend how financial markets work, it is crucial to draw on concepts, theories and ideas from a variety of disciplines, including physics, economics, anthropology, sociology and others.

The authors comprehensively summarise the current state of the behavioural finance literature on alternatives to the EMH.

The purpose of this paper is to test the weak form of the efficient market hypothesis (EMH) using monthly data from 2004M08 to 2018M04 for two Canadian stock indices: the Islamic (DJICPI) and the conventional (CCSI). This paper investigates whether Islamic and/or conventional stock market would be efficient through the non-stationarity test of the stock indices.

The authors conduct the linearity test of Harvey et al. (2008) to identify whether the considered series has linear or nonlinear behavior. If the time series exhibits nonlinear evolution, then the authors apply nonlinear unit root tests (three KSS type tests and Sollis tests).

Linearity test results say that LCCSI has nonlinear behavior, while Dow Jones Islamic Canadian Price Index, LDJICPI, is a linear process. Then, the findings of this paper show that only Canadian Islamic Price Index (DJICPI) has the characteristics of random walk indicating that only conventional stock markets are inefficient. The major implication is that in Canada, fund managers and investors can (cannot) enjoy excess returns to their investment in conventional (Islamic) stock market.

Numerous empirical studies of the weak EMH are carried out within a linear framework. However, stock indices can show nonlinear behavior as a result of 2008 global financial crisis. To contribute to the existing literature on the Islamic and conventional stock market efficiency, the authors take into account both structural breaks and nonlinearity. Thus, as a testing strategy for weak EMH, the authors perform (Harvey et al., 2008) linearity test to examine the presence of nonlinear behavior and correct for outliers effect when it is needed.

This paper aims to study the weak form of efficiency of Indian capital market during the period of global financial crisis in the form of random walk.

The study considered daily closing prices of S&P CNX Nifty, BSE, CNX100, S&P CNX 500 from April 1, 2005 to March 31, 2010. The data source is the equity market segment of NSE and BSE. Both parametric and nonparametric tests (“ex‐posts” in nature) are applied for the purpose of testing weak‐form efficiency. The parametric tests include Augmented Dickey‐Fuller (ADF) unit root tests and nonparametric tests include Phillips‐Perron (PP) unit root tests and Run test. ADF tests use a parametric autoregressive structure to capture serial correlation and PP tests use non‐parametric corrections based on estimates of the long‐run variance of ΔY_t.

The results suggested that the Indian stock market was efficient in its weak form during the period of recession. It means that investors should not be able to consistently earn abnormal gains by analysing the historical prices. Hence one should not be able to make a profit from using something that everybody else knows.

The study reports that all the stocks in these selected indices are fundamentally strong and their prices are not influenced largely by historical prices and other relevant factors which came from industry and any other information that is publically available. Thus it can be concluded that the Indian stock market was informationally efficient and no investor can usurp any privileged information to make abnormal profits.

Where past studies have examined the weak‐form of efficiency of various markets and the effect of globalisation and global financial crisis on the various sectors of developing and emerging economies, this paper attempts to study the weak form of efficiency of the Indian capital market in the period of recession in the form of random walk.