Abstract

http://ssrn.com/abstract=654565
 
 

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MOME in Hindsight


Ronald J. Gilson


Stanford Law School; Columbia Law School; European Corporate Governance Institute (ECGI)

Reinier Kraakman


Harvard Law School; European Corporate Governance Institute


Regulation, Vol. 27, No. 4, pp. 64-72, Winter 2004

Abstract:     
Two decades ago, the Virginia Law Review published our article "The Mechanisms of Market Efficiency" (MOME), in which we tried to discern the institutional underpinnings of financial market efficiency. We concluded that the level of market efficiency with respect to a particular fact depends on which of several market mechanisms - universally informed trading, professionally informed trading, derivatively informed trading, and uninformed trading operates to reflect that fact in market price. Revisiting our article is particularly appropriate today. A new framework for evaluating the efficiency of the stock market, called "behavioral finance," and a growing number of empirical studies pose a serious challenge to the Efficient Markets Hypothesis. Twenty years have made us appropriately more skeptical of the efficiency of those institutions.

Number of Pages in PDF File: 9

Keywords: Market efficiency, financial market efficiency, universally informed trading, professionally informed trading, derivatievly informed trading, uninformed trading, behavioral finance, efficients markets hypothesis, securities and exchange, capital asset prices, capital markets, valuation

JEL Classification: G10, G14, G28

Accepted Paper Series


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Date posted: January 26, 2005  

Suggested Citation

Gilson, Ronald J. and Kraakman, Reinier, MOME in Hindsight. Regulation, Vol. 27, No. 4, pp. 64-72, Winter 2004. Available at SSRN: http://ssrn.com/abstract=654565

Contact Information

Ronald J. Gilson (Contact Author)
Stanford Law School ( email )
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-0614 (Phone)
650-725-0253 (Fax)
Columbia Law School ( email )
435 West 116th Street
New York, NY 10025
United States
212-854-1655 (Phone)
212-854-7946 (Fax)
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Reinier H. Kraakman
Harvard Law School ( email )
1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-496-3586 (Phone)
617-496-6118 (Fax)
European Corporate Governance Institute ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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