Some Anomalous Evidence Regarding Market Efficiency

10 Pages Posted: 12 Aug 2002 Last revised: 23 Apr 2011

See all articles by Michael C. Jensen

Michael C. Jensen

Harvard Business School; SSRN; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Accounting & Control Unit

Date Written: May 4, 1978


The efficient market hypothesis has been widely tested and, with few exceptions, found consistent with the data in a wide variety of markets: the New York and American Stock Exchanges, the Australian, English, and German stock markets, various commodity futures markets, the Over-the-Counter markets, the corporate and government bond markets, the option market, and the market for seats on the New York Stock Exchange.

Yet, in a manner remarkably similar to that described by Thomas Kuhn in his book, The Structure of Scientific Revolutions, we seem to be entering a stage where widely scattered and as yet incohesive evidence is arising which seems to be inconsistent with the theory. As better data become available (e.g., daily stock price data) and as our econometric sophistication increases, we are beginning to find inconsistencies that our cruder data and techniques missed in the past. It is evidence which we will not be able to ignore.

The purpose of this special issue of the Journal of Financial Economics is to bring together a number of these scattered pieces of anomalous evidence regarding Market Efficiency. As Ball (1978) points out in his survey article: taken individually many scattered pieces of evidence on the reaction of stock prices to earnings announcements which are inconsistent with the theory don't amount to much. Yet viewed as a whole, these pieces of evidence begin to stack up in a manner which make a much stronger case for the necessity to carefully review both our acceptance of the efficient market theory and our methodological procedures.

Keywords: market efficiency, Efficient Market Theory, theory of 'random walks', rational expectations theory, abnormal returns, asset pricing model

Suggested Citation

Jensen, Michael C., Some Anomalous Evidence Regarding Market Efficiency (May 4, 1978). Journal of Financial Economics, Vol. 6, Nos. 2/3, pp. 95-101, 1978, Available at SSRN: or

Michael C. Jensen (Contact Author)

Harvard Business School ( email )

Soldiers Field
Negotiations, Organizations & Markets
Boston, MA 02163
United States


SSRN ( email )

United States


National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Harvard University - Accounting & Control Unit ( email )

Soldiers Field
Boston, MA 02163
United States