Abstract
Research in finance is guided by powerful intuitions from models of efficient markets. However, researchers have uncovered a number of puzzles that are not explained by these models. Such anomalies include the excess volatility of stock prices, the closed-end mutual fund paradox, and the mean reversion in stock prices that produces predictable returns for long holding periods.1 Whereas financial economists all recognize the existence of these puzzles, they disagree about how they can be explained. Robert J. Shiller argues, for example, that efficient-markets models cannot hope to explain these anomalies and looks to alternatives that incorporate fads.2 In contrast, John H. Cochrane believes that the puzzles can be explained by improved models of fundamentals.3
Publisher
Cambridge University Press (CUP)
Subject
Economics, Econometrics and Finance (miscellaneous),Economics and Econometrics,History
Reference20 articles.
1. In Search of Stock Market Bubbles;Liu;JOURNAL,1995
2. Permanent and Temporary Components of Stock Prices
3. Commercial and Financial Chronicle, 1919–1920.
4. Volatility tests and efficient markets
Cited by
4 articles.
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