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Transformations of efficient market hypothesis under the influence of behavioral finance
Type of publication
Straipsnis Scopus duomenų bazėje / Article in Scopus database (S1b)
Author(s)
Kauno technologijos universitetas | |
Venclauskienė, Deimantė | Kauno technologijos universitetas |
Title
Transformations of efficient market hypothesis under the influence of behavioral finance
Publisher (trusted)
MCSER - Mediterranean Center of Social and Educational Research |
Date Issued
2014
Extent
p. 327-333
Is part of
Mediterranean journal of social sciences. Rome : MCSER Publishing, 2014, vol. 5, iss. 13.
Field of Science
Abstract
The paper provides a theoretical study on efficient market hypothesis (EMH) changes under the influence of behavioral finance. Authors of the paper briefly provide the basic assumptions of efficient markets theory and remind how the top of its dominance was reached in the 1970s. At the same time the goal of the paper is to develop the unbiased and complex overview of the today’s market efficiency and show its transformations under the impact of market participants’ irrationality. In the paper authors introduce the interaction between market efficiency, market arbitrage, irrationality of market participants and highlight the importance to revise the reliability of efficient market theory assumptions in order to achieve high performance of investment portfolios. Through the behavioral finance point of view authors not only aggregate the critics EMH faces during the recent years, but also evaluate today’s opportunities for arbitrage and provide arbitrage critics. According to documented by experimental economists departures from market efficiency and taking into consideration their nature, i.e. investors’ irrationality as a result of influence of a set of specific behavioral (both cognitive and emotional) biases, an alternative to EMH approach called “The Adaptive Markets Hypothesis” espoused by Andrew Lo in 2004 is introduced. The supporters of the EMH have responded to these challenges by arguing that, while behavioral biases and corresponding inefficiencies do exist from time to time, there is a limit to their prevalence and impact because of opposing forces dedicated to exploiting such opportunities. Finally, basic financial market anomalies are presented in the paper as an example of market inefficiency. On the one hand, their persistence in the face of public scrutiny seems to be a clear violation of the EMH. [...]
Type of document
type::text::journal::journal article::research article
ISSN (of the container)
2039-9340
2039-2117
SCOPUS
2-s2.0-84906908068
eLABa
3370454
Coverage Spatial
Italija / Italy (IT)
Language
Anglų / English (en)
Bibliographic Details
23
Creative Commons License