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Are Financial Markets Efficient ?

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Are Financial Markets Efficient ?

Publié par :
Ajouté le : 21 juillet 2011
Lecture(s) : 90
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Are Financial Markets Efficient ?
David THESMAR (HEC)
This course describes the intense academic controversy over economic theories of
asset (stock) prices. Such theories make assumptions about investor behaviour (their
degree of rationality, their ability to engage in arbitrage).
On the one hand, there are those who defend the “Efficient Market Hypothesis”, on
the grounds that financial markets offer very few opportunities to make riskless
profits, which leads to the fact that prices are almost always right. On the other hand,
advocates of “Behavioral Finance” contend that existing theories consistent with the
EMH have very little predictive power over asset prices, and that significant riskless
arbitrage opportunities do survive on financial markets.
This lively debate has provided the underpinnings for the vast empirical literature on
asset pricing that will be reviewed in this course.
1. Small bits of theory of asset pricing in equilibrium: the EMH
a. CAPM and tests of CAPM : not so great.
b. CCAPM and test of CCAPM : equity premium puzzle
c. APT
Cochrane, John, “Asset Pricing”, MIT Press
Fama and French, 2004, “The Capital Asset Pricing Model: Theory and Evidence”,
Journal of Economic Perspectives
Julliard and Parker, 2005, “Consumption Risk and the Cross Section of Expected
Returns”, Journal of Political Economy
2. First attack : Post announcement drift
a. EMH - Event studies : M&As, Repurchase, SEO
Roll, Richard, 1986, “The Hubris Hypothesis of Corporate Takeovers”, Journal of
Business
b. The post announcement drift
Lakonishok and Vermaelen, 1990, “Anomalous Price Behavior Around Repurchase
Tender Offers”, Journal of Finance
Loughran and Vijh, 1997, “Do Long Term Shareholders Benefit from Corporate
Acquisitions ?”, Journal of Finance
Loughran and Ritter, 1995, “The New Issues Puzzle”, Journal of Finance
Bernard and Thomas 1990, “Post Earnings Announcement Drifts: Delayed Price
Response or Risk Premium ?”, Journal of Accounting Research
c. The Mitchell and stafford critic: back to square one.
Mitchell and Stafford, 2000, “Managerial Decision and Long Term Stock Price
Performance”, Journal of Business
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