Stock Market

Stock markets are important today. For economy, it can improve use of domestic saving, construct a channel for saving to be utilized, and build privatisation reform. For savers, it provides an opportunity to investment and enables them to spread risk. For companies, it accesses to capital, provides opportunity to expand by acquisition and improve gearing, and transfers the risk. Thus stock market keep efficient is significant. Efficient market is divided by three forms. One of these is weak form which is share price reflect all past movements and these are irrelevant when predict future movements. Semi-strong form is that  reflect available information, also reflect  to new information. Strong form is that share price reflects all of the information.

Moutai Plc is a liquor company. On January 2013 the company’s wine include element which would damage people’s healthy was exposure by a website which is a famous stock market website. Because of this news, its share price reduced sharply. And at that time the news cannot sure whether it is true. The following days many medium started to focus this event. Meanwhile its share price kept decreasing. Finally the event was proved is true. And its share price decreased by 20%.  

In the case share price reflect information is immediate. However, at the beginning the news cannot proved whether it is true. The share price was influenced by the bad news. The outcome is true. But if the news was not true, The Company is poor. In addition, the person, who exposure the news and ran the famous website, ever did same thing for another company, and he is a short-seller. Thus if the information is utilized by someone who has some objectives, it will be hard to reflect the real company’s situation. It is not fair for public.