The Fama critique

Essay specific features

 

Issue:

Business

 

Written by:

Mae V

 

Date added:

August 3, 2016

 

Level:

University

 

Grade:

A

 

No of pages / words:

7 / 1721

 

Was viewed:

8512 times

 

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Essay content:

The supporters of EMH argue that all available information is included in the stock prices, which means that any long-term abnormal returns earned are a matter of chance. On the other side, the supporters of behavioral finance argues that because of over- and under-reaction by investors to information, it takes time before prices fully adjust and thus there is an opportunity to earn long-term abnormal returns...
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Fama published a famous critique on long-term return anomalies. He infers that all anomalies that was pointed out in scientific papers up until then where a matter of chance. His argues that it is easy to show the weaknesses of behavioral models and proof of anomalies. If there is a more or less even split between over- and under-reaction, and continuation and reversal of returns, then this supports the market efficiency hypothesis that any abnormal returns are chance...
displayed 300 characters

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