Over the last 100years since Bachelier (1900)pioneering work on Random Walk Hypothesis,
studies on the Efficient Market Hypothesis (EMH) have revealed mixed evidence. EMH
states that stock prices reflect information. In an efficient market the prices of stocks reflect
a rational assessment of the underlying worth of stocks. On average you will make money
but the money you make is just enough to cover the risk you have assumed. If markets are
efficient then new information is reflected quickly into market prices. Conversely, if markets
are inefficient, information is reflected only slowly into market prices, if at all. EMH also
presupposes an ability to detect incorrectly priced securities and profitable arbitraging
opportunities which move the market towards efficiency. After the first marginal investor
had profited from a price increase (or decrease), subsequent investors with the same
information obtain no significant profits. This means that, in general, majority of investors
cannot consistently profit from any delays in price adjustment reflecting new information.
However continuous stream of well-documented evidence from the behavioural finance
literature suggest that markets are inefficient. This paper attempts to review this controversy
based on world evidence at large and with special reference to the Kuala Lumpur Stock
Exchange and offers suitable panacea to rationalize this phenomena
