82913 LECTURE - MARKET EFFICIENCY EFFICIENT MARKET HY...

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MARKET EFFICIENCY EFFICIENT MARKET HYPOTHESIS weak form semi-strong form strong form INSIDER TRADING Reasons for illegality Violation of strong form efficiency
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Behavioral Finance (or anti- EMH) Humans do not always act in the best interests, or in their best economic interests. Sometimes we act – irrationally instead of rationally like the EMH is predicated on. When would we ever be irrational?
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Behavioral Finance Anchoring Attach or “anchor” your thoughts or beliefs on a singular reference point that actually has no logical reference to your decision. example: Stock at Price X, then falls to Y. Hot Damn! We can buy it at a discount! Everyone loves a sale!!!
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Behavioral Finance Mental Accounting Separating money into different groups (mentally) based on some subjective reasoning. Example: Walking down the street, and you find $100 bill. Are you more likely to spend that $100 on something frivolous versus $100 of your paycheck?
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