ISBN10: 0198292279, ISBN13: 9780198292272, [publisher: Oxford University Press, Oxford] Softcover Paperback. 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 because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions ofinvestor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade againstarbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocksincluded in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance,the book builds a new theoretical and empirical foundation for ...
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ISBN10: 0198292279, ISBN13: 9780198292272, [publisher: OUP Oxford 2000-03-09, Oxford] Softcover Language: ENG
[London, United Kingdom] [Publication Year: 2000]