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Investing with Ben Graham: An Ex Ante Test of the Efficient Markets Hypothesis

Published online by Cambridge University Press:  06 April 2009

Henry R. Oppenheimer  and
Gary G. Schlarbaum
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Extract

In an efficient capital market, prices fully reflect available information and adjust to new information in a rapid and unbiased fashion. As a result, prices provide unbiased estimates of the underlying values. No known trading rule or security selection strategy which uses only publicly available information would provide an investor with the ability to earn, on average, positive “abnormal” returns in a market that is efficient in the semi-strong sense. Thus, a finding that common stocks selected, using a readily available, widely disseminated set of rules which requires only publicly available information for decision-making purposes, earn, on average, positive abnormal returns represents strong contradictory evidence regarding the semi-strong form of the efficient markets hypothesis.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 16 , Issue 3 , September 1981 , pp. 341 - 360
Copyright
Copyright © School of Business Administration, University of Washington 1981

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