The effect of the Prime Minister’s announcement regarding the 1Malaysia email on the stock price of Tricubes is interesting.
Tricubes’ stock price rose after the information about its 1Malaysia email project was first made public. That is fine. The efficient-market hypothesis says that all available information is summarized by its price. Here was a chance to turn a problematic company profitable and the market understood this. Some market participants responded by buying the stocks.
What is not fine is when the price jumped many times over after the Prime Minister announced the same thing more than a week later.
Since the two announcements relayed the same information, only the first announcement should have impacted the price, if the market was efficient. The second announcement was merely a repeat of what everybody in an efficient market should have known. The second announcement should not have effected the price in an efficient market.
Yet, price did go up.
Does that mean the Malaysian stock market is inefficient?
p/s — this was written late at night and my mind just was not working. This entry had a very different opening but I thought it was digressing too much that I thought it was easy to misunderstood what I wanted to touch about in the end, which was the efficient-market hypothesis. Just for the record, this was the opening:
Just as the Tricubes and the 1Malaysia email matter started to die down a bit, Idris Jala the man himself poured fuel into the fire to open PEMANDU up for yet another round of harsh criticism: why did PEMANDU, a public setup, defend what was supposedly a private initiative? Earlier communication mixed up ended up embarrassing the Prime Minister, whom shared with the public what PEMANDU knew was more complicated than what the Prime Minister thought he knew.
I am adding this just because I thought it shares what I thought of the whole issue. I wanted to share it but it is so insignificant (one paragraph) but adding it as a postscript would be sufficient.
2 replies on “[2359] Tricubes and apparent inefficiency in the market”
Read the “advertorial” by Idris Jala yesterday.
1. He badly needs a proper PR agency.
2. He’s being coerced into being the bad guy.
3. BN has aboslutely no idea what they were getting themselves into.
No, the market is efficient – and investors are fully aware that there’s a higher correlation between the KLCI and Putrajaya, than between the KLCI and Twitterjaya. :)