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The Birth of the Efficient Market Hypothesis

In: A Random Walk to Nowhere How the Professors Caused a Real “Fraud-on-the-Market”

Author

Listed:
  • Edward E. Williams
  • John A. Dobelman

Abstract

The seeds for the EMH were germinated by a modest effort by Harry Roberts (Journal of Finance, 1959) who was a statistician at the University of Chicago at the time. Roberts’ paper posited the following: (1) Movements in stock prices conform to a normal (bell curve) distribution, (2) random selections may be made from such a distribution, and (3) the results may be added to an arbitrary starting price. From this Roberts noted that the results looked a lot like the DJIA over time (for the interested reader, the process is described in mathematical detail in Thompson, Williams and Findlay, Models for Investors in Real World Markets, 2003)…

Suggested Citation

  • Edward E. Williams & John A. Dobelman, 2020. "The Birth of the Efficient Market Hypothesis," World Scientific Book Chapters, in: A Random Walk to Nowhere How the Professors Caused a Real “Fraud-on-the-Market”, chapter 3, pages 39-52, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811207792_0003
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    More about this item

    Keywords

    Efficient Market Hypothesis; Market Inefficiency; Mathematical Economics; Academic Finance; Real-World Markets; Fraud; Random Walk;
    All these keywords.

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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