投资学-Chap12.pptVIP

Chapter 12 Market Efficiency and Behavioral Finance Efficient Market Hypothesis EMH Do security prices reflect information ? Why look at market efficiency? Implications for business and corporate finance Implications for investment Random Walk and the EMH Random Walk - stock prices are random Actually submartingale Expected price is positive over time Positive trend and random about the trend Random Walk with Positive Trend Random Price Changes Why are price changes random? Prices react to information Flow of information is random Therefore, price changes are random EMH and Competition Stock prices fully and accurately reflect publicly available information. Once information becomes available, market participants analyze it. Competition assures prices reflect information. Forms of the EMH Weak Semi-strong Strong Types of Stock Analysis Technical Analysis - using prices and volume information to predict future prices. Weak form efficiency technical analysis Fundamental Analysis - using economic and accounting information to predict stock prices. Semi strong form efficiency fundamental analysis Active or Passive Management Active Management Security analysis Timing Passive Management Buy and Hold Index Funds Market Efficiency Portfolio Management Even if the market is efficient a role exists for portfolio management: Appropriate risk level Tax considerations Other considerations Empirical Tests of Market Efficiency Event studies Assessing performance of professional managers Testing some trading rule How Tests Are Structured 1. Examine prices and returns over time Returns Over Time How Tests Are Structured cont’d 2. Returns are adjusted to determine if they are abnormal. Market Model approach a. Rt at + btRmt + et Expected Return b. Excess Return Actual - Expected et Actual - at + btRmt How Tests Are Structured cont’d 2. Returns are adjusted to determine if they are abnormal. Market Model approach c. Cumulate the excess returns over time: Issu