Lecture+13+Oct+31+2011

Lecture+13+Oct+31+2011 - FINA3104:...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
FINA 3104: Investment Analysis and Portfolio Management Lecture 13 – The Efficient Market Hypothesis and Behavioral Finance Darwin Choi October 31, 2011 Recap from Last Lecture Performance Evaluation Overview Six Performance Measures Sharpe Measure Treynor Measure Jensen Measure Information Ratio Modigliani Modigliani Measure, M 2 Mixed Measure Application Luck or Skill? 2
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Outline of Today’s Lecture Forms of Market Efficiency 3 Suppose the “true” value of a stock is $110. But it now trades at $100. How can this be? The true value is not yet known by the market. Once this information is revealed, “arbitrage” ensures the price quickly moves to true value. Buyers flock to buy the stock, owners refuse to sell under $110, so prices jump to $110. 4
Background image of page 2
Therefore, stock prices only change when new information arrives on the market.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 8

Lecture+13+Oct+31+2011 - FINA3104:...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online