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1、Irwin/McGraw-HillChapter 12Fundamentals of Corporate FinanceThird EditionCorporate Financing and the Lessons of Market EfficiencyBrealey Myers Marcusslides by Matthew WillIrwin/McGraw-HillThe McGraw-Hill Companies,Inc.,2001Topics CoveredInvestment Decision vs.Financing DecisionMarket EfficiencyWeak
2、form efficiencySemi-strong form efficiencyStrong form efficiencyLessons of Market EfficiencyInvestment vs.FinancingInvestment decision are made based on the risk of the project,with total disregard for how the project will be financed(flotation costs being the exception).Financing decisions are made
3、 based on the conditions in the capital markets,with little consideration for the investment being made(project specific funding being the exception.IRBs are a good example).Market Efficiency Theory Capital markets reflect all relevant information.You cannot consistently earn excess profits.Market E
4、fficiencyMarket EfficiencyEfficient Capital Markets-Financial markets in which security prices rapidly reflect all relevant information about asset values.Random Walk-Security prices change randomly,with no predictable trends or patterns.Random Walk TheoryThe movement of stock prices from day to day
5、 DO NOT reflect any pattern.Statistically speaking,the movement of stock prices is random(skewed positive over the long term).Random Walk Theory$103.00$100.00$106.09$100.43$97.50$100.43$95.06Coin Toss GameHeadsHeadsHeadsTailsTailsTailsRandom Walk TheoryS&P 500 Five Year Trend?or5 yrs of the Coin Tos
6、s Game?80130180MonthLevelRandom Walk TheoryS&P 500 Five Year Trend?or5 yrs of the Coin Toss Game?80130180230MonthLevelMarket EfficiencyTechnical Analysts-Investors who attempt to identify over-or undervalued stocks by searching for patterns in past prices.Fundamental Analysts-Analysts who attempt to
7、 fund under-or overvalued securities by analyzing fundamental information,such as earnings,asset values,and business prospects.Efficient Market TheoryLast MonthThis MonthNext Month$907050EIs Stock PriceCycles disappear once identifiedMarket EfficiencyWeak Form Efficiency-Market prices rapidly reflec
8、t all information contained in the history of past prices.Semi-Strong Form Efficiency-Market prices reflect all publicly available information.Strong Form Efficiency-Market prices reflect all information that could in principle be used to determine true value.Efficient Market Theory-16-11-6-14914192
9、4293439Days Relative to annoncement dateCumulative Abnormal Return(%)Announcement DateMarket Efficiency0510152025Average return,percentHighestLowestBook-Market RatioFama&FrenchReturn vs.Book-MarketLessons of Market EfficiencyMarkets have no memoryTrust market pricesThere are no financial illusionsDo it yourself diversificationSeen one stock,seen them allReading the entrails
taiwan财务管理_lecture12(ch12)
