Journal of Economic and Social Dynamics

Abstract

This study is an exploration of the efficient market hypothesis (EMH), a widely used conventional framework of predictability in finance that conveys the idea of “asset prices, stock prices in particular, that fully reflect information” [3]. The EMH is a key concept in the field of finance that assumes reflection of either weak, semi-strong, or strong forms of assumptions that are summarized as public knowledge seen in stock prices. Possibilities for analysis can be the five popular tech savvy FAANG companies ((acronym for the companies Facebook (now Meta Platforms), Apple, Amazon.com, Netflix, and Google (now Alphabet)) that trade heavily within the framework of the EMH. FAANG are the “most widely held stocks” [11]. These large firms have high volatility, are innovative, and are assumed to reflect all public information. FAANG often displays non-random or herd behaviour where anomalies occur. This demonstrates that the EMH may not predict stock movements accurately or efficiently all the time. Yet the EMH is still an important component of understanding large firms with anomalies that reflect no perfect market efficiency.