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I. Efficient Market Hypothesis
Euhene Fama, professor of the University of Chicago, issued an article entitled “the Behavior of Stock Market Prices” in 1965 on the Journal of Business in which the famous efficient market hypothesis was brought forward. EMH explains the efficient market as the stock market in which price can reflect all acquirable information. As the basis of modern finance, EMH was another invisible hand of Adam Smith in the finance market.
1. Random Walk
In 1953, a statistician named Maurice Kendall found that the price of stock changed in a random way after making analysis on the time series of the stock price by computer. The random change of stock price found by Kendall is called as Random Walk. The Stock Random Walk seems to show that the change of stock is just as capricious as human emotion without obeying any logic and laws.
2. The three forms of EMH
a. Week form efficiency
Historical security prices information such as stock price, volume, short selling amount, financing amount and short-term gains can be fully predicted from historical market price.If https://www.51lunwen.org/translation/2012/0615/2140089998.html the week form efficiency is proved as right, investors won’t make excess profit by analyzing the historical information of the stock market because the stock market is independent of its historical behavior and the historical time series of stock changes in a random walk which makes stock price analysis ineffective (Fama,1965), Only fundamental analysis can help investors make excess profit.
b. Semi-Strong Form Efficiency
Semi--Strong Form Efficiency is developed on the basis of week form efficiency. In the Semi-Strong Form Efficiency, the stock price reflects not only historical information but also all the public information. No investors can utilize historical information and public information to make excess profit because https://www.51lunwen.org/literatureother/ the stock price is optimal reflection of the two kind of information. Since the fundamental analysis on the stock price is to make analysis on all public information including political information, macro-economy information and the operation status information about security companies, the fundamental analysis based on the public information doesn’t work well in the Semi-Strong Form Market.

Reference
Fama,F.,(1965), Random Walks In Stock Market Prices, Financial Analysts Journal 21 (5): 55–59.
Fama,F., (1993), Common Risk Factors in the Returns on Stocks and Bonds,Journal of Financial Economics 33 (1): 3–56.
Ainslie, G. (1975), Specious Reward: A Behavioral /Theory of Impulsiveness and Impulse Control,Psychological Bulletin 82 (4): 463–496.
Becker, S.,(1968). "Crime and Punishment: An Economic Approach". The Journal of Political Economy 76 (2): 169–217.
Kirkpatrick, D., (2007). Technical Analysis: The Complete Resource for Financial Market Technicians. Upper Saddle River, NJ: Financial Times Press. ISBN 0-13-153113-1.

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