mirroring is a kind of back-up system used to manage time
competitively on the Internet services. Initially it was called
Raid, an acronym for redundant arrays of inexpensive
disks. It was used when bottlenecks would crash computer
systems, by facilitating a switch to full databases in locations,
removed from headquarters.
If we purchase shares for the long haul, and we use the discounted
value of expected future cash flows, as we saw last week,
modern stock market theory supports the view, that we are
likely to make superlative stock picks.
The length of time that it takes for stock prices to adjust
new market information, is another important overall indicator,
in determining the worth of an investment on the stock market.
It is the concept of market efficiency.
The efficient market hypothesis supports the view that markets
are efficient when the prices of securities reflect their
true economic value.
An efficient market adjusts quickly to the different types
of available information. There are three forms. An emphasis
on price and volume data, called Market data is based on historical
trades. If the market is efficient current prices will be
a result of the past prices and volumes.
This is the traditional method in use, and since price data
is historical, one can question the real value of technical
analysis based on such criteria, in a dynamic environment
whose most compelling characteristic is rapidity. It is called
a weak-form and if price reflects all past data,
then there is a weak relationship and the market is regarded
as weakly efficient.
A semi strong form is based on what is called public information.
This includes earnings, stock splits, cost of debt and equity,
changes in accounting practices, and new product development.
A semi strong form implies that investors are unable to act
quickly enough on the information, and do not have first mover
In the third form: the strong form, the hypothesis is that
all information is available to investors. So that in addition
to the above market data, the public sea of investors also
have knowledge of private market data.
This private data refers to items known only to corporate
boards, and insiders, generally. Such data may relate to systems
implementation failure that cost a company millions of dollars,
poor turn around times, inadequate communications that impede
production lines ineffective decentralisation, wasteful advertising
budgets, low level human resource management, and disregard
for the environment.
It can also relate to impending changes in legalisation, and
decisions routed by consumer protest, the Senate, or litigation,
known only to those involved in these processes.
In the strong form, no investors can earn above average returns,
since the public will know whats going down in time
enough to make calls and puts or buy and sell bids. It is
the highest form of market efficiency.
The test of the efficient market hypothesis, a hypothesis
not supported everywhere, is really that track of consistency
in results. If certain investors consistently earn above average
returns, the market is not strongly efficient.
If the market is efficient, there are no discrepancies in
information to be exploited and stock prices will be only
slightly higher than the intrinsic value, or slightly lower.
But, you can buy stocks today, and benefit from a sudden discovery,
such as a silicon substitute!