scholarly journals Market Efficiency, Long-Term Returns, and Behavioral Finance

1997 ◽  
Author(s):  
Eugene F. Fama
Keyword(s):  
Market Efficiency ◽  
Behavioral Finance

scholarly journals Capital Market Theories: Market Efficiency Versus Investor Prospects

2012 ◽  
Vol 11 (8) ◽  
pp. 849
Author(s):  
Kathleen Hodnett ◽  
Heng-Hsing Hsieh
Keyword(s):  
Market Efficiency ◽  
Behavioral Finance ◽  
Capital Market ◽  
Asset Allocation ◽  
Efficient Market Hypothesis ◽  
Capital Asset Pricing ◽  
Arbitrage Pricing Theory ◽  
Market Portfolio ◽  
Pricing Theory

This paper reviews the development of capital market theories based on the assumption of capital market efficiency, which includes the efficient market hypothesis (EMH), modern portfolio theory (MPT), the capital asset pricing model (CAPM), the implications of MPT in asset allocation decisions, criticisms regarding the market portfolio and the development of the arbitrage pricing theory (APT). An alternative school of thought proposes that investors are irrational and that their trading behaviors are driven by psychological biases such as greed and fear. Prospect theory and the role of behavioral finance that describe investment decisions in imperfect capital markets are presented to contrast the Utopian assumption of perfect market efficiency. The paper concludes with the argument of Hirshleifer (2001) that heuristics are shared by investors and asset prices may not reflect their long-term intrinsic values as indicated by efficient capital market theories.

Market Efficiency, Long-Term Returns, and Behavioral Finance

CFA Digest ◽  
2000 ◽  
Vol 30 (1) ◽  
pp. 62-63
Author(s):  
Johann deVilliers
Keyword(s):  
Market Efficiency ◽  
Behavioral Finance

A multifractal detrended fluctuation analysis of housing market: a role of financial crises in developed economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Syed Ali Raza ◽  
Nida Shah ◽  
Muhammad Tahir Suleman ◽  
Md Al Mamun
Keyword(s):  
Financial Crisis ◽  
Housing Market ◽  
Market Efficiency ◽  
House Price ◽  
Fluctuation Analysis ◽  
Content Type ◽  
Multifractal Detrended Fluctuation Analysis ◽  
Long Run ◽  
Before And After

Purpose This study aims to examine the house price fluctuations in G7 countries by using the multifractal detrended fluctuation analysis (MF-DFA) for the years 1970–2019. The study examined the market efficiency between the short-term and long-term in the full sample period, before and after the global financial crisis period. Design/methodology/approach This study uses the MF-DFA to analyze house price fluctuations. Findings The findings confirmed that the housing market series are multifractal. Furthermore, all the markets showed long-term persistence in both the short and long-term. The USA is identified as the most persistent house market in the short run and Japan in the long run. Moreover, in terms of efficiency, Canada is identified as the most efficient house market in the long run and the UK in the short run. Finally, the result of before and after the financial crisis period is consistent with the full sample result. Originality/value The contribution of this study in the literature is fourfold. This is the first study that has examined the house prices efficiency by using the MF-DFA technique given by Kantelhardt et al. (2002). Previously, the house market prices and efficiency has been investigated using generalized Hurst exponent (Liu et al., 2019), Quantile Regression Approach (Chae and Bera, 2019; Tiwari et al., 2019) but no study to the best of the knowledge has been done that has used the MF-DFA technique on the housing market. Second, this is the first study that has focused on the house markets of G7 countries. Third, this study explores the house market efficiency by dividing the market into two periods i.e. before and after the financial crisis. The study strives to investigate if the financial crisis determines the change in the degree of market efficiency or not. Finally, the study gives valuable insights to the investors that will help them in their investment decisions.

High-Frequency Trading and its Role in Fragmented Markets

2017 ◽  
Vol 32 (3) ◽  
pp. 283-296 ◽  
Author(s):  
Martin Haferkorn
Keyword(s):  
Market Efficiency ◽  
High Frequency ◽  
Efficient Market Hypothesis ◽  
High Frequency Trading ◽  
Electronic Market ◽  
Coordination Costs ◽  
Major Transformation ◽  
Securities Trading ◽  
Term Analysis

Securities trading underwent a major transformation within the last decade. This transformation was mainly driven by the regulatory induced fragmentation and by the increase of high-frequency trading (HFT). On the basis of the electronic market hypothesis, which poses that coordination costs decline when markets become automated, and the efficient market hypothesis in its semi-strong form, we study the effect of HFT on market efficiency in the European fragmented market landscape. In doing so, we further incorporate the realm of financialization, which criticizes the increase in transaction speed. By conducting a long-term analysis of CAC 40 securities, we find that HFT increases market efficiency by leveling midpoints between Euronext Paris and Bats Chi-X Europe. On the basis of a crosscountry event study, we analyze the effect of the German HFT Act. We observe that the midpoint dispersion of blue chip securities between the two leading venues Deutsche Boerse and Bats Chi-X Europe increased. We conclude that HFT increases market efficiency in the European market landscape by transmitting information between distant markets.

Long-term reactions to large stock price declines and increases in the European stock market: a note on market efficiency

2010 ◽  
Vol 36 (2) ◽  
pp. 400-423 ◽  
Author(s):  
Achim Himmelmann ◽  
Dirk Schiereck ◽  
Marc W. Simpson ◽  
Moritz Zschoche
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Stock Price

Financial Behavior

2017 ◽  
Author(s):  
H. Kent Baker ◽  
Greg Filbeck ◽  
Victor Ricciardi
Keyword(s):  
Market Efficiency ◽  
Behavioral Finance ◽  
Financial Services ◽  
Financial Behavior ◽  
Market Behavior ◽  
Intended Audience ◽  
Financial Applications ◽  
Behavioral Aspects ◽  
Distinguishing Features ◽  
Complex Subject

Financial behavior is a complex subject because how people should behave according to traditional finance often differs from how they actually behave. Although traditional and behavioral finance play important roles in understanding investor and market behavior, this book focuses on behavioral finance. Behavioral finance uses insights largely from finance, psychology, and other disciplines to explain how people act and how their behavior affects markets and other financial applications. This chapter provides an overview of behavioral finance, followed by a brief explanation of the book’s purpose, distinguishing features, and intended audience. The chapter outlines the book’s structure of: (1) financial behavior and psychology, (2) financial behavior of major players, (3) financial and investor psychology of specific players, (4) psychology of financial services, (5) behavioral aspects of investment products and markets, (6) market efficiency issues, and (7) application and future of behavioral finance.

Market Efficiency versus Behavioral Finance

2005 ◽  
Vol 17 (3) ◽  
pp. 124-136 ◽  
Author(s):  
Burton Malkiel ◽  
Sendhil Mullainathan ◽  
Bruce Stangle
Keyword(s):  
Market Efficiency ◽  
Behavioral Finance

scholarly journals Review on Efficiency and Anomalies in Stock Markets

Economies ◽  
2020 ◽  
Vol 8 (1) ◽  
pp. 20 ◽  
Author(s):  
Kai-Yin Woo ◽  
Chulin Mai ◽  
Michael McAleer ◽  
Wing-Keung Wong
Keyword(s):  
Market Efficiency ◽  
Behavioral Finance ◽  
Stock Markets ◽  
Stock Price ◽  
Efficient Market Hypothesis ◽  
Past Century ◽  
Behavioral Models ◽  
Market Anomalies ◽  
Policy Makers ◽  
Conflicting Evidence

The efficient-market hypothesis (EMH) is one of the most important economic and financial hypotheses that have been tested over the past century. Due to many abnormal phenomena and conflicting evidence, otherwise known as anomalies against EMH, some academics have questioned whether EMH is valid, and pointed out that the financial literature has substantial evidence of anomalies, so that many theories have been developed to explain some anomalies. To address the issue, this paper reviews the theory and literature on market efficiency and market anomalies. We give a brief review on market efficiency and clearly define the concept of market efficiency and the EMH. We discuss some efforts that challenge the EMH. We review different market anomalies and different theories of Behavioral Finance that could be used to explain such market anomalies. This review is useful to academics for developing cutting-edge treatments of financial theory that EMH, anomalies, and Behavioral Finance underlie. The review is also beneficial to investors for making choices of investment products and strategies that suit their risk preferences and behavioral traits predicted from behavioral models. Finally, when EMH, anomalies and Behavioral Finance are used to explain the impacts of investor behavior on stock price movements, it is invaluable to policy makers, when reviewing their policies, to avoid excessive fluctuations in stock markets.

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