Market Rationality: Efficient Market Hypothesis versus Market Anomalies
@article{Yalcin2010MarketRE, title={Market Rationality: Efficient Market Hypothesis versus Market Anomalies}, author={Kadir C. Yalcin}, journal={European Journal of Economic and Political Studies}, year={2010}, volume={3}, pages={23-38} }
Market efficiency theory suggests that market is rational and provides correct pricing. That is, the current prices of securities are close to their fundamental values because of either the rational investors or the arbitragers' buy and sell action of underpriced or overpriced stocks. On the other hand, observed market anomalies have a challenge for this argument. They claim that irrational investment activities and the arbitrage opportunities' being limited in markets cause some market…
Figures from this paper
42 Citations
Market Efficiency, Market Anomalies, Causes, Evidences, and Some Behavioral Aspects of Market Anomalies
- Economics
- 2012
Market efficiency hypothesis suggests that markets are rational and their prices fully reflect all available information. Due to the timely actions of investors prices of stocks quickly adjust to the…
An Alternative Approach in Evaluating Rational Speculative Bubbles in Stock Exchange
- Economics
- 2015
The forming of explosive bubbles in stock prices is one of the destructive and devastating factors in capital market. Considering the strategic importance of economic and financial these markets, one…
An Analysis of January Effect on Different BIST Indexes in Turkish Stock Markets
- Economics
- 2018
Efficient Market Theory has been the single and controlling theory of portfolio management for many years. But the Behavioural Finance discipline has challenged the assumptions of Efficient Market…
Against the Herd: Contrarian Investment Strategies on the Johannesburg Stock Exchange
- Business, Economics
- 2014
This study seeks to investigate herd behaviour among equity mutual fund managers and the performance of mutual funds that trade against the herd in South Africa. The behaviour of mutual funds has an…
The effect of investment regulatory changes on stock prices and trading volumes: Evidence from Iraq Stock Exchange
- Business, Economics
- 2014
This study investigates the effect of investment regulatory changes by examining the
difference in stock prices and trading volume before and after the changes in the investment regulations in Iraq…
Portfolio Investment in Malaysia and Saudi Arabia
- Business, EconomicsMultidisciplinary Perspectives on Cross-Border Trade and Business
- 2022
Several strategies are adopted by investors in lowering the risk of investment while maximising its return. Graham's stock selection criteria are noted as one of the best strategies in selecting…
Evaluate Multifactor Asset Pricing Models , to Explain Market Anomalies, Applicable Test in the Saudi Stock Market
- Economics
- 2016
This paper compares and evaluates the performance of eight different multifactor assetpricing models to identify and explain Anomalies in Saudi stock market (SSM). Data set of daily stock prices and…
Political Cycle and Stock Market - The Case of Malaysia
- Economics, Business
- 2015
The orchestration between the political cycle and the stock market behavior has been long found by many researchers. However, the research contexts of those findings usually do not cover the…
Adaptive Expectations with Correction Bias: Evidence from the lab
- Economics
- 2015
The present work analyzes the individual behavior in an experimental asset market in which the only task of each player is to predict the future price of an asset. To form their expectations, players…
References
SHOWING 1-10 OF 64 REFERENCES
Inefficient Markets: An Introduction to Behavioral Finance
- Economics
- 2000
The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either…
Investment Performance of Common Stocks in Relation to their Price-Earnings Ratios
- Economics
- 1977
IN AN EFFICIENT CAPITAL MARKET, security prices fully reflect available information in a rapid and unbiased fashion and thus provide unbiased estimates of the underlying values. While there is…
Noise Trader Risk in Financial Markets
- EconomicsJournal of Political Economy
- 1990
We present a simple overlapping generations model of an asset market in which irrational noise traders with erroneous stochastic beliefs both affect prices and earn higher expected returns. The…
The efficient market hypothesis revisited: Some evidence from the Istanbul Stock Exchange
- Economics, Business
- 1995
This thesis seeks to address three important issues relating to the efficient functioning of the Istanbul Stock Exchange. In particular the thesis seeks to answer the following questions 1. What…
Misspecification of capital asset pricing : Empirical anomalies based on earnings' yields and market values
- Economics, Business
- 1981
Does the Stock Market Overreact
- Economics
- 1985
Research in experimental psychology suggests that, in violation of Bayes' rule, most people tend to "overreact" to unexpected and dramatic news events. This study of market efficiency investigates…
Contrarian Investment, Extrapolation, and Risk
- Economics, Business
- 1993
For many years, stock market analysts have argued that value strategies outperform the market. These value strategies call for buying stocks that have low prices relative to earnings, dividends, book…
Myopic Loss Aversion and the Equity Premium Puzzle
- Economics
- 1993
The equity premium puzzle, first documented by Mehra and Prescott, refers to the empirical fact that stocks have greatly outperformed bonds over the last century. As Mehra and Prescott point out, it…
The New Issues Puzzle
- Economics, Business
- 1995
Companies issuing stock during 1970 to 1990, whether an initial public offering or a seasoned equity offering, have been poor long-run investments for investors. During the five years after the…
POST-EARNINGS-ANNOUNCEMENT DRIFT - DELAYED PRICE RESPONSE OR RISK PREMIUM
- Business
- 1989
This study seeks to discriminate between competing explanations of "post-earnings-announcement drift." Ball and Brown [1968] were the first to note that even after earnings are announced, estimated…