Efficient market hypothesis and Behavioral finance
Fall 2011 Teacher: Guðrún Johnsen V-780-BFIM
Student: Rúnar Guðnason SSN:1804784939
Table of Contents
Introduction ................................................................................................................................ 3 1.1 Efficient market hypothesis .................................................................................................. 3 1.2 A criticism on the efficient market hypothesis ................................................................. 4 2.1 Behavioral finance and the efficient market hypothesis ...................................................... 5 2.2 Prospect theory and Loss aversion ................................................................................... 6 2.3 Mental accounting ............................................................................................................ 8 2.4 Framing ............................................................................................................................. 9 2.5 Overconfidence ............................................................................................................... 10 2.6 Representativeness heuristic ........................................................................................... 11 2.7 Conservatism .................................................................................................................. 12 2.8 Feedback theory (herd behavior) .................................................................................... 12 2.9 Limits to arbitrage .......................................................................................................... 13 3.1 The defense for the efficient market hypothesis ................................................................ 14 4.1 Discussion .......................................................................................................................... 15 References... [continues]
Fall 2011 Teacher: Guðrún Johnsen V-780-BFIM
Student: Rúnar Guðnason SSN:1804784939
Table of Contents
Introduction ................................................................................................................................ 3 1.1 Efficient market hypothesis .................................................................................................. 3 1.2 A criticism on the efficient market hypothesis ................................................................. 4 2.1 Behavioral finance and the efficient market hypothesis ...................................................... 5 2.2 Prospect theory and Loss aversion ................................................................................... 6 2.3 Mental accounting ............................................................................................................ 8 2.4 Framing ............................................................................................................................. 9 2.5 Overconfidence ............................................................................................................... 10 2.6 Representativeness heuristic ........................................................................................... 11 2.7 Conservatism .................................................................................................................. 12 2.8 Feedback theory (herd behavior) .................................................................................... 12 2.9 Limits to arbitrage .......................................................................................................... 13 3.1 The defense for the efficient market hypothesis ................................................................ 14 4.1 Discussion .......................................................................................................................... 15 References... [continues]
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