References (105)



On the Efficient Market Equilibrium and the Pricing of Equities: A Fundamental Approach to Real Time Pricing

Y. I. T. Mtulia

Howard University - School of Business

December 31, 2009

The extraordinary events of September 2008 suggest that the prevailing framework of financial economics, namely the efficient markets hypothesis (EMH), is not effective in helping investors protect their savings against poorly priced investments. Following a careful study, it is suggested that swift market adjustments and real time asset pricing could more effectively be understood using advanced fundamental analysis, where the ratios of return to risk measures are in equilibrium. The model expands on time tested finance principles to account for continuous changes in expected returns, from which adjustments to asset values can be gauged in real time. The efficient market equilibrium is a quantifiable market condition that is used to compare value between any two investments based simply on their expected return and risk distributions. From this, follow the computation of real time discount rates which are in agreement with the spirit of CAPM, the pricing of equities in real time, the analysis of price adjustments in real time and the understanding of bull and bear markets in real time as warranted by experience. The conclusion is that swift price adjustments including panics, are more effectively understood using advanced fundamental analysis, whenever price ratios deviate from their equilibrium.

Number of Pages in PDF File: 23

Keywords: Market efficiency, random prices, time value of money, neutrality of money, price equilibrium, arbitrage, CAPM, expected returns, panics, bull and bear markets, fed model

working papers series

Download This Paper

Date posted: January 29, 2010 ; Last revised: October 3, 2014

Suggested Citation

Mtulia, Y. I. T., On the Efficient Market Equilibrium and the Pricing of Equities: A Fundamental Approach to Real Time Pricing (December 31, 2009). Available at SSRN: http://ssrn.com/abstract=1544011 or http://dx.doi.org/10.2139/ssrn.1544011

Contact Information

Yussuf I Mtulia (Contact Author)
Howard University - School of Business ( email )
Washington, DC 20059
United States
Feedback to SSRN

Paper statistics
Abstract Views: 883
Downloads: 150
Download Rank: 120,128
References:  105
People who downloaded this paper also downloaded:
1. Review of: Predicting Presidential Elections and Other Things
By J. Armstrong

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.641 seconds