Stock Market efficiency & Company valuation Essay

Stock Market efficiency & Company valuation - Essay ExampleA fundamental feature of this analysis is the assessments on Majestic Wine plc, which is the foremost mixed case wine retailer in the UK. The company is quoted on the preference Investment Market (AIM) of the London Stock Exchange, which aims to assist companies that are operating on a smaller scale in meeting their requirements of capital for the purposes of enlargement (London Stock Exchange 2013a). The categories of analysis for Majestic Wine plc are based on a range of distinct evaluations, which shall assess the plow price movements and nurture flows to the market for the company and also conduct a comprehensive appraisal of the market price of the companys shares, in accordance with the value assessments methods that are understood to be standard procedures in company valuation. The Signifi bumce of the Efficient-Market Hypothesis (EMH) According to Buckle and Thompson (2004, p174) the practical significance of the hypothesis regarding efficient markets is a effect which cannot be ignored. The application of this hypothesis postulates that the stock markets agreement with its observations can lead to a situation where predicting changes in share prices are no longer considered to be viable as the market prices are an exact representation of each and every data or information that is present (Buckle and Thompson, 2004, p174). The classifications of features that can assist in the development of a well-informed discussion regarding stock market efficiency are based on the categories of return predictability, event studies and underground information. Buckle and Thompson (2004, p175) understand that assessing these concepts with respect to the London Stock Exchange can uncover whether its functioning is efficient or not. Theoretical Implications of EMH and the Random Walk exemplification Barnes (2012, p46) highlights the theoretical implications of stock market efficiency which is essentially a system where an informational efficient market is said to be the cause of allocative efficiency. Accordingly, the basis of this efficiency is examined on three forms that were developed by Eugene Fama and were termed as weak, semi-strong and strong (Barnes 2012, p46). According to Barnes (2012, p46) the weak form is described as a situation in which any upstart information regarding a company is represented by movements in the new price on an immediate basis, henceforth this notion follows the ideology which states that new share movements cannot be determined through movements in old share prices. Analysts term this phenomenon as the random walk. While, several examinations on UK Stock market exact aimed to establish its efficiency, numerous competing literatures have uncovered narrates which invalidate these claims. Dimson and Mussavian (1998, p92 2000, p9) understand that the findings of numerous studies which report the presence of anomalies is indicative of features which oppose the principal of market efficiency. Researches which have pointed towards the occurrences of such characteristics that are largely inconsistent with economic ideologies aim to comprehend the trends in pricing efficiency within stock markets. A piece of empirical evidence which represents the phenomenon of the random walk and the presence of its corresponding concept which is known as the weak-form efficiency with respect to t