Behavioral Efficient Markets

2 Pages Posted: 11 Dec 2017

See all articles by Meir Statman

Meir Statman

Santa Clara University - Department of Finance

Date Written: December 6, 2017

Abstract

Discussions about market efficiency in finance are unfocused when they fail to distinguish between the price-equals-value market hypothesis and the hard-to-beat market hypothesis. And discussions are further lacking when they fail to explain why so many investors believe that markets are easy to beat when, in truth, they are hard to beat.

As described in Finance for Normal People and this article, behavioral finance contributes positively to these discussions by making the distinction between the price-equals-value market hypothesis and the hard-to-beat market hypothesis and by explaining why so many investors believe that markets are easy to beat when, in truth, that is hard to do.

Behavioral finance concludes that markets are not price-equals-value markets but they are rather hard-to-beat for investors lacking exclusively or narrowly-available information. And behavioral finance elucidates the cognitive and emotional errors that mislead investors with nothing but widely-available information into the belief that markets are easy to beat.

Keywords: Efficient markets, asset pricing models, behavioral finance

JEL Classification: G11, G12, G14

Suggested Citation

Statman, Meir, Behavioral Efficient Markets (December 6, 2017). Available at SSRN: https://ssrn.com/abstract=3083527 or http://dx.doi.org/10.2139/ssrn.3083527

Meir Statman (Contact Author)

Santa Clara University - Department of Finance ( email )

500 El Camino Real
Santa Clara, CA 95053
United States
408-554-4147 (Phone)
408-554-4029 (Fax)

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