<P> Investors may temporarily move financial prices away from market equilibrium . Over-reactions may occur--so that excessive optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low . Economists continue to debate whether financial markets are generally efficient . </P> <P> According to one interpretation of the efficient - market hypothesis (EMH), only changes in fundamental factors, such as the outlook for margins, profits or dividends, ought to affect share prices beyond the short term, where random' noise' in the system may prevail . The' hard' efficient - market hypothesis does not explain the cause of events such as the crash in 1987, when the Dow Jones Industrial Average plummeted 22.6 percent--the largest - ever one - day fall in the United States . </P> <P> This event demonstrated that share prices can fall dramatically even though no generally agreed upon definite cause has been found: a thorough search failed to detect any' reasonable' development that might have accounted for the crash . (Note that such events are predicted to occur strictly by chance, although very rarely .) It seems also to be the case more generally that many price movements (beyond that which are predicted to occur' randomly') are not occasioned by new information; a study of the fifty largest one - day share price movements in the United States in the post-war period seems to confirm this . </P> <P> A' soft' EMH has emerged which does not require that prices remain at or near equilibrium, but only that market participants not be able to systematically profit from any momentary market' inefficiencies' . Moreover, while EMH predicts that all price movement (in the absence of change in fundamental information) is random (i.e., non-trending), many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer . Various explanations for such large and apparently non-random price movements have been promulgated . For instance, some research has shown that changes in estimated risk, and the use of certain strategies, such as stop - loss limits and value at risk limits, theoretically could cause financial markets to overreact . But the best explanation seems to be that the distribution of stock market prices is non-Gaussian (in which case EMH, in any of its current forms, would not be strictly applicable). </P>

In what market do most us stock market transactions occur