Are the markets for financial assets efficient? : Evidence for the USA, 1974–1988

The analysis in this paper addresses the efficient markets hypothesis as it pertains to the markets for financial assets. Both weak form efficiency and semistrong form efficiency are investigated for three different financial assets - common stocks, preferred stocks and government bonds. For these assets the markets are indicated to be weak form efficient based on monthly data covering the period January 1974 to June 1988. In the case of semistrong form efficiency, the financial assets markets are efficient with respect to the supply of money for the period after October 1979 but not before. This anomaly is attributed to the different procedures used by the Federal Open Market Committee between the two periods for controlling the growth rate of the money supply.