Efficient Markets and Behavioral Finance

Objective

  • Describe how risk and return relate to market efficiency

Reading

  • Chapter 11: Market Efficiency
  • Chapter 12: Market Efficiency
  • Chapter 13: Behavioral Finance

Efficient Markets

Robert Shiller @ Yale in 2011

Qualitative Efficiency

  • Weak-Form Efficiency
  • Semi-Strong Form Efficiency
  • Strong Form Efficiency

The Efficient Market Hypothesis

Quantitative Efficiency

  • Random Walk
  • Martingale

Behavioral Finance

Robert Shiller @ Yale in 2011

Behavioral Biases

Technical Analysis

  • Market Breadth
  • Short Interest
  • Moving Averages
  • Volatility Skew

Optional

Are Markets Efficient? (Fama vs Thaler)

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