Abstract
The development of the capital markets is changing the relevance and empirical validity of theefficient market hypothesis. The dynamism of capital markets determines the need for efficiency research. The authors analyse the development and the current status of the efficient market hypothesis with an emphasis on the Baltic stock market. Investors often fail to earn an excess profit, but yet stock market anomalies are observed and market prices often deviate from their intrinsic value. The article presents an analysis of the concept of efficient market. Also, the market efficiency evolution is reviewed and its current status is analysed. This paper presents also an examination of stock market efficiency in the Baltic countries. Finally, the research methods are reviewed and the methodology of testing the weak-form efficiency in a developing market is suggested.
Highlights
The efficient market hypothesis (EMH) has been under academic and professional consideration for many years
The academic and professional focus has shifted to the behavioural finance theory, yet it does not eliminate the usefulness of the EMH
The issue of global research on stock market efficiency has been addressed by quite a number of scholars
Summary
The efficient market hypothesis (EMH) has been under academic and professional consideration for many years. Research in the field of stock market efficiency is important for both private and institutional investors. The EMH may be used to model the development of the stock market being important for stock market operators and supervisors. The academic and professional focus has shifted to the behavioural finance theory, yet it does not eliminate the usefulness of the EMH. The issue of global research on stock market efficiency has been addressed by quite a number of scholars. The very first ideas and findings in the field date back to the 19th century. Those ideas were later gradually developed and gained
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