What is the market anomaly?
market anomaly is essentially an opportunity for investors to profit on the basis of shares on financial markets. It is a theory that suggests that financial securities such as stocks could be underestimated, and therefore investors could earn money to buy cheap shares. On the other hand, investors can benefit from sales of shares that are more than securities, actually worth it. Market anomalies, which can also be referred to as market inefficiency, is a disruption of another market theory that is referred to as an effective market hypothesis.
In order to understand the occurrence of an anomaly on the market, it is necessary to understand the factors behind the effective market. This is because inefficiency is aberration on the effective market. On the effective market, shares prices reflect the actual financial security value.
According to the effective market theory, all relevant information that can affect the value of the stock, took into account and reflects in the current price. This suggests that investors cannot eventually benefit from iDentifications of shares that are undervalued because unknown conditions simply do not exist. Similarly, shares cannot achieve a value that is greater than what securities are worth what is known. Market anomalies are introduced when the assumption for the effective market is seemingly violated.
It is only possible to recognize the market anomaly of conditions. Analysts can study past performance in the stock market to test whether the theory of market inefficiency is true. A sufficient amount of time after inefficiency must be expired to be properly tested.
market anomalies could develop in specific stock categories. For example, conditions in shares of a certain market capitalization or market limit, which is the value of the company value on the stock market could show signs of aberration on the effective market. One way that this anomaly could be seen is if business activity in the Group of the ActionFor example, small CAP stocks exceed the expectations of analysts or economists on an effective market.
timing can also play in the creation of what seems to be a market anomaly. Investors sometimes make decisions on purchasing and sales on the stock market on the basis of factors outside the financial conditions. For example, sales activities must be robust at the end of the year because investors are trying to realize tax benefits. The trend in this particular group of shares may have little to do with the ineffectiveness of the market.