In this paper, I will briefly discuss capital market efficiency and then finish with an extensive discussion of the Efficient Market Hypothesis (EMH), which is a leading theory in explaining some of the major reasons for fluctuations in security prices.
You need descriptive statistics for three reasons. First, if you don’t have enough variance on the variables of interest, you can’t test your null hypothesis. If everyone is white or no one is obese, you don’t have the right dataset for your study. Second, you are going to need to include a table of sample statistics in your paper. This should include standard demographic variables – age, sex, education, income and race are the main ones. Last, and not necessarily least, descriptive statistics will give you some insight into how your data are coded and distributed.
50 years ago, Milton Friedman articulated the natural rate hypothesis. It was composed of two sub-hypotheses: First, the natural rate of unemployment is independent of monetary policy. Second, there is no long-run trade-off between the deviation of unemployment from the natural rate and inflation. Both propositions have been challenged. The paper reviews the arguments and the macro and micro evidence against each. It concludes that, in each case, the evidence is suggestive, but not conclusive. Policy makers should keep the natural rate hypothesis as their null hypothesis, but keep an open mind and put some weight on the alternatives.