Running Head: Efficient Market Hypothesis of Apple.
Inc 1
Efficient Market Hypothesis of Apple.Inc
Student Name
University Name
Date
Efficient Market Hypothesis of Apple.Inc 2
Table of Contents
Introduction......................................................................................................................3
The Volatility of Market through Efficient Market Hypothesis....................................4
Impact of Covid-19 on Apple.Inc Stock Market............................................................5
Event Analysis for testing EMH.....................................................................................7
Trading Strategies for Apple.Inc....................................................................................8
Put funds aside.............................................................................................................8
Trading plan..................................................................................................................9
Conservative investment strategy..............................................................................9
Apple Forecast at cut-off date......................................................................................10
Conclusion.....................................................................................................................11
References......................................................................................................................13
Table of Figures
Figure 1: Volatility Price of Apple.Inc....................................................................................................7
Figure 2: Support Resistance Area.......................................................................................................9
Figure 3: Apple Stock Forecast...........................................................................................................11
Efficient Market Hypothesis of Apple.Inc 3
Efficient Market Hypothesis of Apple.Inc
Introduction
The Efficient Market Hypothesis (EMH) is a concept that has
been the center of discussion for the past several years.
People give their point of view about this concept and
whether it is beneficial to do such a hypothesis or not. During
the past years, so many counterarguments have been made
about this some in favor and some against the concept. This
is basically a marketing theory that uses the hypothesis
method to predict the pricing. These predictions are helpful
for the investors to make decisions on whether they should
invest in some specific business or not (Gordon, 2022).
The purpose of this article is to analyze the Efficient Market
Hypothesis in real-life examples as this theory can implement
to study the impact of Covid-19 on the pricing of big
businesses such as McDonald’s, Apple, KFC, Amazon, etc.
In this report, I tried to put a glance at the financial activities
of Apple.Inc during Covid-19. The study is based on
evidence and statistical data in order to do the practical
implementation of the Efficient Market Hypothesis to check
the price movement in the Apple stock market.
Moreover, event analysis has been used in this study to
evaluate price changes at any specific event faced by the
business in practical life. The price changes could be positive
and negative; in case the inefficiencies occurred in the
market, they had been highlighted in the report with the
explained reasoning why this happened at a certain level
(Static.helpsytem, 2018).
Efficient Market Hypothesis of Apple.Inc 4
The Volatility of Market through Efficient Market
Hypothesis
The Efficient Market Hypothesis (EMH) summarizes the
market price activities quickly in order to give an overview to
the investors. Sometimes, investors do proper research on a
stock market and gather information by themselves, but
sometimes, they just check the whole information by a glance
at Efficient Market Hypothesis (EMH) graphs and reports. It
helps them in quick and content decision-making about their
investment in Apple.Inc (Teall, 2018). Efficient Market
Hypothesis (EMH) has another name called “Investment
Theory,” which explains the data from stock indexes such as
S&P 500 Index. Efficient Market Hypothesis (EMH) is use to
do predictions about Apple stock market. It is also called
“Fama Theory” because this was raised by Eugena F. Fama
and Paul A. Samuelson in 1960, which says investors feel
that buying stocks with short-term profits is more beneficial
than stocks with long-term profits which is comparatively
higher than the market average.
This theory tells about assumptions and predictions and
current position of Apple stock market to give information to
investors about appropriate investment. This information is
not based on specific country; this is worldwide gathered
information that is universally shared with the all investors. In
the stock market, there are hundreds of buyers and sellers
trading stocks with each other, so the stock market works
efficiently. The price movement in Apple stock market is
smooth, and stocks are available at a fair market price
(Team, 2022). The market price fluctuates when new
information is added to the market, in such conditions, the
Efficient Market Hypothesis of Apple.Inc 5
prices react suddenly to the change. There is also a condition
of market efficiency where all activities are going well, in this
scenario, the pricing cannot be changed, and investors
cannot earn more than a specified amount of profit. The
benefit of the Efficient Market Hypothesis (EMH) is that it
convinces investors to act rationally and logically in response
to price movement (THUNE, 2021).
EMH of Apple helps out not only to investors but also to the
business itself to make a proper trading plan. Compared to
1970s, the market brokers are greater in number and are
easily available to the general public through the vast internet
availability. Still, there are a number of inexperienced people
working out there, and they are not rational about their
decisions, which causes serious consequences faced by
everyone in the stock market. This cannot be neglected at
any cost as the neglection may create instability in the stock
market. Being a giant company, Apple cannot afford such
extreme consequences. EMH can be used as an indicator to
measure changes occurring in the market causing changes
in market efficiency. As the work world is changing
throughout, it also effected businesses and the stock market
and brought changes to them too.
Impact of Covid-19 on Apple.Inc Stock Market
The impact of Covid-19 on the world economy is clear that it
has lowered down world’s economy to the worst level.
Businesses like apparel, food, furniture, etc faced severe
losses during the pandemic but the tech industry is the only
industry that benefited from it, such as Apple .inc got a boost
in its sales during Covid-19. Apple faced extreme volatility in
202,0 which was the central year of the pandemic, the
Efficient Market Hypothesis of Apple.Inc 6
volatility was good for the company because Apple stock
prices rises in the stock market. Apple’s sales increased in
this tenure and the company benefited from it. In a
lockdown, people were quarantined in their homes and they
need a distraction to get rid of this panic situation, so they
moved towards technology and advanced gadget. People
eagerly bought new handsets and laptops in order to divert
their minds from that disease (Horák & Kaisler, 2022).
Figure 1: Volatility Price of Apple.Inc
Efficient Market Hypothesis of Apple.Inc 7
From this graph it can be observed that from 2012 to 2022,
Apple faced price volatility and the highest volatile year is
2020 (a year of a pandemic). Stock volatility is a good
indicator that stock prices are getting higher and higher which
will eventually give benefit to the organization. The more
volatile the stock market is that means the more profit for the
firm same as for Apple, it has earned more profit during
Covid-19 (Netcials, 2022).
Event Analysis for testing EMH
Event analysis is used to test the Efficient Market Hypothesis
(EMH) in order to get authentic results. The event that is
used for Apple.Inc is the “Launch of iPhone 12 pro max”
which was launched during the pandemic on October 13,
2020. This is the event window and I have analyzed the price
volatility of Apple.Inc three months before and after the event
window. Before three months, Apple’s customer’s response
was like they eagerly waited for the launch of new iPhone
model every year, and in October 2020, iPhone 12 pro max
had to be launched due to which customers were already so
excited to purchase this new model. When the latest model
of iPhone launched, it surprisingly increased the sales of this
model and ultimately millions of revenue earned by Apple.Inc
, this was the extremely volatile change in Apple’s stock
market during Covid-19. The rise in sales increased the stock
price of Apple and ultimately this positive volatilization
occurred during the event (GADGETS NOW, 2022).
Efficient Market Hypothesis of Apple.Inc 8
Trading Strategies for Apple.Inc
Figure 2: Support Resistance Area
Looking at the above graph, it is clear that the Apple stock
market graph is increasing from 2020 to 2022. Still there are
some downfalls during this time spam that can be treated by
using the best trading strategies (cmcmarkets, 2022).
Although the pandemic has remained the highest volatile
time period for Apple stock market but still there are multiple
trading strategies Apple.Inc could use it to increase its
profitability during the whole Covid-19 era. Some of the
important strategies are:
Put funds aside
Apple should separate a specific amount of funds aside for
trading only. The risk on that capital should be maximum of
1% to 2% so that in case of loss, company will not bear
severe consequences. Trading is processed in stock market
which can be beneficial for the company as well as be
Efficient Market Hypothesis of Apple.Inc 9
hazardous for company stability, so just like other companies
Apple should also pay more attention to its trading in the
stock market.
Trading plan
Apple is a large corporation having a very good reputation in
stock market. It always should have a strong trading plan to
get more profit from the stock market. A plan consists of
strategies that are helpful in aching goals, and if there is no
such plan the organization will lead towards danger. Trading
plan allows businesses to set a specific amount of their stock
within stock market, and prices must have the courage to
bear a specific risk rate and a loss ratio. A rule-based trading
would be the best option for a giant businesses like Apple.Inc
to stand strong in the stock market (Friedberg, 2021).
Conservative investment strategy
Conservative investment strategy says that organizations
should invest in stocks and other financial instruments, but
they should follow some regulations and limitations in order
to lessen the amount of loss. Conservative investment
strategy is one of the strategies that help businesses to
invest a specific amount of capital with minimum loss and
minimum risk in the stock market. So in case of any loss, the
firm may not face bad consequences.
Efficient Market Hypothesis of Apple.Inc 10
Apple Forecast at cut-off date
Figure 3: Apple Stock Forecast
This Apple stock forecast graph shows that Apple stock
market was doing from 2017 to mid of 2019. It was not a
good time for investors to invest in the stocks of Apple.Inc
and the ones who invested faced bearable loss. As
compared to previous years, 2020 which was the era of
Covid-19 considered the most volatile year because this year
Apple launched its latest iPhone 12 pro max series due to
which there was a huge positive change in apple price
movements in the stock market.
From the above graph, it is clear that from 2020 to 2022, the
slope is moving upward, showing a positive change in Apple
stock market so 2022 is the best time for investors to invest
in Apple.Inc till the cut-off date which is June 2022. The
Efficient Market Hypothesis (EMH) is helpful to investors in
such circumstances when they have to make decisions about
Efficient Market Hypothesis of Apple.Inc 11
their investment in the stock market. EMH provides insights
into the stock market that are really a source of prediction for
businesses and for investors too. Even though they get know
about the amount of loss they are going to face in case of
downfall of stock market or market shares. These insights
are a useful source to keep a check on the market shares
and the time of its peak and low volatility.
Conclusion
Apple.Inc has been discussed in this essay to explain the
Efficient Market Hypothesis (EMH). Further event analysis
has been used to test this EMH theory. There is graphical
representation of Apple stock market shares and some of the
important data has been discussed in this essay regarding
investment in Apple stock market. This is basically a
marketing theory that uses the hypothesis method to predict
the pricing. These predictions are helpful for the investors to
make decisions on whether they should invest in some
specific business or not. Efficient Market Hypothesis (EMH)
has some other names such as the “Fama Theory” and the
“Investment Theory” because its main purpose is to give
knowledge about reasonable investment in the stock market.
This theory is based on assumptions and predictions about
the current position of the stock market in order to give
information to investors and businesses as well. This
information is not based on only one business niche or a
specific country; this is worldwide gathered information that is
universally shared with all investors. In the stock market,
there are hundreds of buyers and sellers trading stocks with
each other, so the stock market works efficiently. Other than
that, the impact of Covid-19 on Apple stock market has been
Efficient Market Hypothesis of Apple.Inc 12
discussed throughout by using graphical representation and
descriptive analysis. Furthermore, trading strategies have
been suggested to Apple.Inc in order to increase its profit by
trading on its stocks. Although the pandemic has remained
the highest volatile time period for Apple stock market still,
there are multiple trading strategies Apple.Inc could use to
increase its profitability in the stock market by making proper
trading plans.
Efficient Market Hypothesis of Apple.Inc 13
References
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from cmcmarkets: https://www.cmcmarkets.com/en/trading-guides/trading-
strategies
Friedberg, B. (2021, august 3). The 5 Best Day Trading Strategies. Retrieved from
GoBankingRates: https://www.gobankingrates.com/investing/stocks/day-trading-
strategies/
GADGETS NOW. (2022, august 3). Apple iPhone 12 Pro Max Price & Specs. Retrieved
from GADGETS NOW: https://www.gadgetsnow.com/mobile-phones/Apple-
iPhone-12-Pro-Max
Gordon, J. (2022, august 3). Efficient Market Hypothesis - Explaine. Retrieved from The
Business Professor: https://thebusinessprofessor.com/en_US/investments-
trading-financial-markets/efficient-market-hypothesis-explained
Horák, J., & Kaisler, D. (2022). Evaluation of development of Apple Inc. stock . SHS
Web of Conferences.
Netcials. (2022, august 3). Apple Inc Stock Volatility. Retrieved from Netcials:
https://www.netcials.com/stock-volatility-nasdaq/AAPL-Apple-Inc/
Static.helpsytem. (2018, august 3). Event Analysis. Retrieved from Static.helpsytem:
https://static.helpsystems.com/insite/2_4/help/ptem/content/resources/
event_analysis.htm
Teall, J. L. (2018). Efficient Market Hypothesis. Financial Trading and Investing.
Team, C. (2022, august 3). Efficient Markets Hypothesis. Retrieved from Corporate
Finance Institute:
https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/
efficient-markets-hypothesis/
Efficient Market Hypothesis of Apple.Inc 14
THUNE, K. (2021, august 3). Efficient Markets Hypothesis (EMH). Retrieved from the
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