The far reaching implications of Fama’s efficient markets hypothesis: non-predictability of media investments

ABSTRACT

In this paper we show, that approaches used to forecast the success of media investments can be challenged on the basis of the efficient markets hypothesis. Moreover, we present new empirical evidence which supports our argumentation in favour of the non-predictability of the success of media investments.

KEYWORDS:

• Efficient markets hypothesis
• media investments
• non-predictability
• variance ratio test

JEL CLASSIFICATION:

• G14
• M31

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ A martingale is another way to state formally the market efficiency hypothesis. The martingale is less restrictive with respect to the properties of shocks than the random walk. However, martingale and random walk reach the same conclusion concerning the unpredictability of next period’s stock price.

² Despite the popularity of the market efficiency hypothesis it is not the only explanation for the behaviour of stock prices. A large part of the behavioural finance literature comes to different conclusions compared with the implications of the efficient markets hypothesis (see, for example, Shleifer 2000).