Are Financial Markets Efficient?

Andrei Shleifer

in Inefficient Markets

Published in print March 2000 | ISBN: 9780198292272
Published online November 2003 | e-ISBN: 9780191596933 | DOI:

Series: Clarendon Lectures in Economics

Are Financial Markets Efficient?

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Assesses the idea of efficient financial markets. It evaluates the theoretical and empirical foundations of the efficient markets hypothesis, emphasising the cracks that have emerged in them. Special attention is given to the rationality of investors, the randomness of the trades, and the role of arbitrageurs. Then the author suggests that an alternative theory—behavioural finance—could be more successful in explaining the evidence. The chapter concludes with a brief outline of the structure of the book.

Keywords: arbitrage; behavioural finance; efficient markets hypothesis; finance; financial market; financial trade; rationality

Chapter.  9850 words.  Illustrated.

Subjects: Financial Markets

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