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Author: Michael Marquardt
Publisher: GRIN Verlag
ISBN: 3640565428
Category : Business & Economics
Languages : en
Pages : 79
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Book Description
Research Paper (undergraduate) from the year 2010 in the subject Business economics - General, grade: 1,3, University of Applied Sciences Northwestern Switzerland, language: English, abstract: The Efficient market hypothesis can be considered as part of rational economics but it does not specify at all how individuals should or will act. Therefore it might be a useful model of the functioning of the market as a whole but it does not explain the behaviors of investors as well as managers and other participants. While the Efficient market hypothesis deals as a basis for understanding the normal working of the markets, from time to time it might happen that the market as a whole or an individual stock may act irrationally. Such behavior is well known and generally occurs when the market price of a share turns away from its intrinsic value. The result is what commonly is called a bubble. This term is often used but the reasons for the occurrence are quite unclear. In fact, at the same time as the market as a whole has become more efficient, instances of irrationality have become more common or at least appear to be. Therefore we try to discuss the question why capital markets, which are considered as efficient and perfect in theory, are volatile and imperfect in reality. The paper responds to this question by discussing mainly the irrational behavior of people by turning into the field of psychology. Furthermore it seeks for approaches of explanation conducted by different investment strategies containing among others an increased use of derivative instruments or single trades based on massive capacity which therefore influence prices. Methodology and Structure of the paper In general the paper can be divided in 3 parts, a theoretical as well as an analytical one and a final point the Conclusion (Part C) which sums up the basic findings of the paper. Whereas Part A can be regarded as delivering the theoretical background, Part B contains the empirical analysis based on several case studies. Chapter 1, 2 and 3 are providing the reader with the needed knowledge of the capital market, volatility and the efficient market hypothesis in order to assure the understanding of the more complex prosecution of the paper After discussing those fundamentals the paper soon takes a view on some instances of irrationality in Part B, but first of all delivers in Chapter 4, 5 and 6 some theories that attempt to explain such irrationalities. Finally the paper is finished by linking those theories with the observed instances of irrationality
Author: Michael Marquardt
Publisher: GRIN Verlag
ISBN: 3640565428
Category : Business & Economics
Languages : en
Pages : 79
Get Book Here
Book Description
Research Paper (undergraduate) from the year 2010 in the subject Business economics - General, grade: 1,3, University of Applied Sciences Northwestern Switzerland, language: English, abstract: The Efficient market hypothesis can be considered as part of rational economics but it does not specify at all how individuals should or will act. Therefore it might be a useful model of the functioning of the market as a whole but it does not explain the behaviors of investors as well as managers and other participants. While the Efficient market hypothesis deals as a basis for understanding the normal working of the markets, from time to time it might happen that the market as a whole or an individual stock may act irrationally. Such behavior is well known and generally occurs when the market price of a share turns away from its intrinsic value. The result is what commonly is called a bubble. This term is often used but the reasons for the occurrence are quite unclear. In fact, at the same time as the market as a whole has become more efficient, instances of irrationality have become more common or at least appear to be. Therefore we try to discuss the question why capital markets, which are considered as efficient and perfect in theory, are volatile and imperfect in reality. The paper responds to this question by discussing mainly the irrational behavior of people by turning into the field of psychology. Furthermore it seeks for approaches of explanation conducted by different investment strategies containing among others an increased use of derivative instruments or single trades based on massive capacity which therefore influence prices. Methodology and Structure of the paper In general the paper can be divided in 3 parts, a theoretical as well as an analytical one and a final point the Conclusion (Part C) which sums up the basic findings of the paper. Whereas Part A can be regarded as delivering the theoretical background, Part B contains the empirical analysis based on several case studies. Chapter 1, 2 and 3 are providing the reader with the needed knowledge of the capital market, volatility and the efficient market hypothesis in order to assure the understanding of the more complex prosecution of the paper After discussing those fundamentals the paper soon takes a view on some instances of irrationality in Part B, but first of all delivers in Chapter 4, 5 and 6 some theories that attempt to explain such irrationalities. Finally the paper is finished by linking those theories with the observed instances of irrationality
Author: Thierry Foucault
Publisher: Oxford University Press
ISBN: 0197542069
Category : Capital market
Languages : en
Pages : 531
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Book Description
"The process by which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. This book offers a more accurate and authoritative take on this process. The book starts from the assumption that not everyone is present at all times simultaneously on the market, and that participants have quite diverse information about the security's fundamentals. As a result, the order flow is a complex mix of information and noise, and a consensus price only emerges gradually over time as the trading process evolves and the participants interpret the actions of other traders. Thus, a security's actual transaction price may deviate from its fundamental value, as it would be assessed by a fully informed set of investors. The book takes these deviations seriously, and explains why and how they emerge in the trading process and are eventually eliminated. The authors draw on a vast body of theoretical insights and empirical findings on security price formation that have come to form a well-defined field within financial economics known as "market microstructure." Focusing on liquidity and price discovery, the book analyzes the tension between the two, pointing out that when price-relevant information reaches the market through trading pressure rather than through a public announcement, liquidity may suffer. It also confronts many striking phenomena in securities markets and uses the analytical tools and empirical methods of market microstructure to understand them. These include issues such as why liquidity changes over time and differs across securities, why large trades move prices up or down, and why these price changes are subsequently reversed, and why we observe temporary deviations from asset fair values"--
Author: John Davis
Publisher: Routledge
ISBN: 1315471590
Category : Business & Economics
Languages : en
Pages : 240
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Book Description
The form of ‘reflexivity’ – defined by the dictionary as that which is ‘directed back upon itself’ – that is most relevant to economic methodology is that where observation of the economy leads to ideas that change behavior, which in turn changes (is directed back upon) the economy itself. As George Soros explains: "if investors believe that markets are efficient then that belief will change the way they invest, and that in turn will change the nature of the markets they are observing ... That is the principle of reflexivity". Although various versions of reflexivity have long been discussed, in recent years George Soros has been particularly effective in bringing ideas about reflexivity to the attention of the economic and financial communities. In a series of writings he has systematically argued that reflexivity is not only an important aspect of economic life, it is an aspect that is neglected in most mainstream theorizing; and in addition, that the neglect of reflexivity has been responsible for the failure of economists to predict, explain, or offer a solution for events such as the recent financial crisis. Soros’ ideas about reflexivity have important methodological significance, and his chapter in this book summarizes and clarifies his arguments. His contribution is joined by those of thirteen scholars from a wide range of relevant fields, who provide a commentary on the idea of reflexivity in economics. This book was originally published as a special issue of The Journal of Economic Methodology.
Author: Matthias Kalkuhl
Publisher: Springer
ISBN: 3319282018
Category : Business & Economics
Languages : en
Pages : 620
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Book Description
This book provides fresh insights into concepts, methods and new research findings on the causes of excessive food price volatility. It also discusses the implications for food security and policy responses to mitigate excessive volatility. The approaches applied by the contributors range from on-the-ground surveys, to panel econometrics and innovative high-frequency time series analysis as well as computational economics methods. It offers policy analysts and decision-makers guidance on dealing with extreme volatility.
Author: Wing-Keung Wong
Publisher: Mdpi AG
ISBN: 9783036530802
Category : Business & Economics
Languages : en
Pages : 232
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Book Description
The Efficient Market Hypothesis believes that it is impossible for an investor to outperform the market because all available information is already built into stock prices. However, some anomalies could persist in stock markets while some other anomalies could appear, disappear and re-appear again without any warning. A Special Issue on "Efficiency and Anomalies in Stock Markets" will be devoted to advancements in the theoretical development of market efficiency and anomaly in the Stock Market, as well as applications in Stock Market efficiency and anomalies.
Author: Niamh Moloney
Publisher: OUP Oxford
ISBN: 0191510866
Category : Law
Languages : en
Pages : 817
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Book Description
The financial system and its regulation have undergone exponential growth and dramatic reform over the last thirty years. This period has witnessed major developments in the nature and intensity of financial markets, as well as repeated cycles of regulatory reform and development, often linked to crisis conditions. The recent financial crisis has led to unparalleled interest in financial regulation from policymakers, economists, legal practitioners, and the academic community, and has prompted large-scale regulatory reform. The Oxford Handbook of Financial Regulation is the first comprehensive, authoritative, and state of the art account of the nature of financial regulation. Written by an international team of leading scholars in the field, it takes a contextual and comparative approach to examine scholarly, policy, and regulatory developments in the past three decades. The first three parts of the Handbook address the underpinning horizontal themes which arise in financial regulation: financial systems and regulation; the organization of financial system regulation, including regional examples from the EU and the US; and the delivery of outcomes and regulatory techniques. The final three Parts address the perennial objectives of financial regulation, widely regarded as the anchors of financial regulation internationally: financial stability, market efficiency, integrity, and transparency; and consumer protection. The Oxford Handbook of Financial Regulation is an invaluable resource for scholars and students of financial regulation, economists, policy-makers and regulators.
Author: Aswath Damodaran
Publisher: Now Publishers Inc
ISBN: 1601980140
Category : Business & Economics
Languages : en
Pages : 102
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Book Description
Valuation lies at the heart of much of what we do in finance, whether it is the study of market efficiency and questions about corporate governance or the comparison of different investment decision rules in capital budgeting. In this paper, we consider the theory and evidence on valuation approaches. We begin by surveying the literature on discounted cash flow valuation models, ranging from the first mentions of the dividend discount model to value stocks to the use of excess return models in more recent years. In the second part of the paper, we examine relative valuation models and, in particular, the use of multiples and comparables in valuation and evaluate whether relative valuation models yield more or less precise estimates of value than discounted cash flow models. In the final part of the paper, we set the stage for further research in valuation by noting the estimation challenges we face as companies globalize and become exposed to risk in multiple countries.
Author: Dimitri Vayanos
Publisher: Now Pub
ISBN: 9781601985989
Category : Business & Economics
Languages : en
Pages : 112
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Book Description
Theories of Liquidity surveys the theoretical literature on market liquidity focusing on six main imperfections studied in that literature: participation costs, transaction costs, asymmetric information, imperfect competition, funding constraints, and search. The authors address three basic questions in the context of each imperfection: (a) how to measure illiquidity, i.e., the lack of liquidity, (b) how illiquidity relates to underlying market imperfections and other asset characteristics, and (c) how illiquidity affects expected asset returns. The theoretical literature on market liquidity often employs different modeling assumptions when studying different imperfections. Instead of surveying this literature in a descriptive manner, Theories of Liquidity uses a common, unified model to study all six imperfections that are considered, and for each imperfection addresses the three basic questions within that model. The model generates many of the key results shown in the literature. It also serves as a point of reference for surveying other results derived in different or more complicated settings, and for describing fruitful areas for future research.This survey is related to both market microstructure and asset pricing. It emphasizes fundamental market imperfections covered in the market microstructure literature, and examines how these relate to empirical measures of illiquidity used in that literature. It also examines how market imperfections affect expected asset returns - an asset-pricing exercise - and, in that sense, connects the two areas of research.
Author: Andrew Ang
Publisher: Now Publishers Inc
ISBN: 1601984685
Category : Business & Economics
Languages : en
Pages : 99
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Book Description
The Efficient Market Hypothesis (EMH) asserts that, at all times, the price of a security reflects all available information about its fundamental value. The implication of the EMH for investors is that, to the extent that speculative trading is costly, speculation must be a loser's game. Hence, under the EMH, a passive strategy is bound eventually to beat a strategy that uses active management, where active management is characterized as trading that seeks to exploit mispriced assets relative to a risk-adjusted benchmark. The EMH has been refined over the past several decades to reflect the realism of the marketplace, including costly information, transactions costs, financing, agency costs, and other real-world frictions. The most recent expressions of the EMH thus allow a role for arbitrageurs in the market who may profit from their comparative advantages. These advantages may include specialized knowledge, lower trading costs, low management fees or agency costs, and a financing structure that allows the arbitrageur to undertake trades with long verification periods. The actions of these arbitrageurs cause liquid securities markets to be generally fairly efficient with respect to information, despite some notable anomalies.
Author: Mr.Stijn Claessens
Publisher: International Monetary Fund
ISBN: 1475561008
Category : Business & Economics
Languages : en
Pages : 66
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Book Description
This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.
