1. Introduction
The primary role of the capital market is allocation of ownership of the economy’s capital stock (Fama 1970). ‘When a business is started it may run for some time as a private organization. It might be a partnership, a proprietorship, or even incorporated. Sometimes the founders and owners of these organizations want to raise capital for expansion of their businesses’ (Richard Field 2002). Therefore a share market exists as a platform for founders and owners, who have not enough capital, to raise capital for their business expansion and for investors, who have capital but no business, to invest in the existing business. When potential investors were trying to make investment decision, they would usually first seek for information helping them to make the decision.
1.1 Efficient Market Hypothesis
The efficient market hypothesis is that the price of a security accurately reflects the information available (Peirson et al. 2003, p. 531). When the potential investors successfully found the available information about a specific company, they might decide to invest (or not invest) in the company’s security. Therefore, the security prices would reflect the available information. The prices of stocks fully incorporate all relevant information and hence stock returns will display unpredictable behaviour are called efficient market (Worthington, 2006).
1.2 Definitions of Efficient Market
In 1970, there were three categories of capital market efficiency used by Fama: Weak form efficient, the information set includes only the history of prices; semi-strong form efficient, prices efficiently adjust to other information that is obviously publicly available, such as announcements of annual earnings stock splits, etc; strong form efficient, gi ...