Ecient-market hypothesis

In nancial economics, the ecient-market hypothesis

(EMH) states that asset prices fully reect all available
information. A direct implication is that it is impossible
to beat the market consistently on a risk-adjusted basis
since market prices should only react to new information
or changes in discount rates (the latter may be predictable
or unpredictable).

so, traders contribute to more and more ecient market prices. In the competitive limit, market prices reect
all available information and prices can only move in response to news. Thus there is a very close link between
EMH and the random walk hypothesis which was discussed in 1863 by Jules Regnault, a French broker. Later
another French mathematician, Louis Bachelier, applied
probability theory in his 1900 PhD thesis, The Theory
of Speculation.[7] His work was largely ignored until the
1950s when nancial economists began making heavy use
of probability theory and statistics to model asset prices
(in particular, options prices).

The EMH was developed by Professor Eugene Fama who

argued that stocks always trade at their fair value, making
it impossible for investors to either purchase undervalued
stocks or sell stocks for inated prices. As such, it should
be impossible to outperform the overall market through
expert stock selection or market timing, and that the only
way an investor can possibly obtain higher returns is by
chance or by purchasing riskier investments.[1] His 2012
study with Kenneth French conrmed this view, showing that the distribution of abnormal returns of US mutual funds is very similar to what would be expected if no
fund managers had any skilla necessary condition for
the EMH to hold.[2]

Empirically, a number of studies indicated that US stock

prices and related nancial series followed a random walk
model in the short-term.[8] Whilst there is some predictability over the long-term, the extent to which this is
due to rational time-varying risk premia as opposed to
behavioural reasons is a subject of debate. Research by
Alfred Cowles in the 1930s and 1940s suggested that professional investors were in general unable to outperform
There are three variants of the hypothesis: weak, the market.
semi-strong, and strong form. The weak form of
the EMH claims that prices on traded assets (e.g., stocks,
bonds, or property) already reect all past publicly avail- 1.1 EMH anomalies and rejection of the
able information. The semi-strong form of the EMH
CAPM
claims both that prices reect all publicly available information and that prices instantly change to reect new pub- While event studies of stock splits is consistent with the
lic information. The strong form of the EMH additionally EMH (Fama, Fisher, Jensen, and Roll, 1969), other emclaims that prices instantly reect even hidden insider pirical analyses have found problems with the ecientinformation.
market hypothesis. Early examples include the observation that small neglected stocks and stocks with low bookmarket ratios (value stocks) tended to achieve abnormally
high returns relative to what could be explained by the
CAPM.[9][10] Further tests of portfolio eciency by Gibbons, Ross and Shakens (1989) (GJR) led to rejections of
the CAPM, although tests of eciency inevitably run into
the joint hypothesis problem (see, Rolls Critique).

Critics have blamed the belief in rational markets for

much of the late-2000s nancial crisis.[3][4][5] In response, proponents of the hypothesis have stated that
market eciency does not mean having no uncertainty
about the future, that market eciency is a simplication
of the world which may not always hold true, and that the
market is practically ecient for investment purposes for
most individuals.[6]

Following GJRs results and mounting empirical evidence

of EMH anomalies, academics began to move away from
the CAPM towards risk factor models such as the FamaFrench 3 factor model. It should be noted that these
risk factor models are not properly founded on economic
theory (whereas CAPM is founded on Modern Portfolio
Theory), but rather, constructed with long-short portfolios in response to the observed empirical EMH anomalies. For instance, the small-minus-big (SMB) factor
in the FF3 factor model is simply a portfolio that holds
long positions on small stocks and short positions on large
stocks to mimic the risks small stocks face. These risk

Historical background

Historically, the EMH is preceded by Hayeks (1945) argument that markets are the most eective way of aggregating the pieces of information dispersed amongst individuals within a society. Given the ability to prot from
private information, self-interested traders are motivated
to acquire and act on their private information. In doing
1

factors are said to represent some aspect or dimension

of undiversiable systematic risk which should be compensated with higher expected returns. Additional popular risk factors include the HML value factor (Fama
and French, 1993); MOM momentum factor (Carhart,
1997); ILLIQ liquidity factors (Amihud et al. 2002).

1.2

Joint hypothesis problem

When testing the EMH one inevitably nds that 1) either

the market is inecient, or 2) the asset pricing model
used to test market eciency is incorrect. Hence tests
of market eciency run into this joint hypothesis problem. For instance, early tests of market eciency used
the CAPM, which could be an incomplete model of asset prices; test results on market eciency would thus be
inconclusive.
Formally, the joint hypothesis problem says that it is
never possible to test (suciently, to prove or disprove)
market eciency. A test of market eciency must include some model for how prices may be set eciently.
Then actual prices can be examined to see whether this
holds true. Usually this fails and then this supports the
case that markets are not ecient. The joint hypothesis
problem says that, when this happens, it shows that the
model is not complete. There are some factors that are
not accounted for.

1.3

Impacts

The ecient-market hypothesis emerged as a prominent theory in the mid-1960s. Paul Samuelson had begun to circulate Bacheliers work among economists. In
1964 Bacheliers dissertation along with the empirical
studies mentioned above were published in an anthology edited by Paul Cootner.[11] In 1965, Eugene Fama
published his dissertation arguing for the random walk
hypothesis.[12] Also, Samuelson published a proof showing that if the market is ecient prices will show randomwalk behavior.[13] This is often cited in support of the
ecient-market theory, by the method of arming the
consequent,[14][15] however in that same paper, Samuelson warns against such backward reasoning, saying From
a nonempirical base of axioms you never get empirical
results.[16] In 1970, Fama published a review of both the
theory and the evidence for the hypothesis. The paper extended and rened the theory, included the denitions for
three forms of nancial market eciency: weak, semistrong and strong (see below).[17]
It has been argued that the stock market is micro ecient but not macro ecient. The main proponent of
this view was Samuelson, who asserted that the EMH is
much better suited for individual stocks than it is for the
aggregate stock market. Research based on regression
and scatter diagrams has strongly supported Samuelsons
dictum.[18] This result is also the theoretical justica-

THEORETICAL BACKGROUND

tion for the forecasting of broad economic trends, which

is provided by a variety of groups including non-prot
groups as well as by for-prot private institutions (such as
brokerage houses[19] and consulting companies[20] ).
Further to this evidence that the UK stock market is
weak-form ecient, other studies of capital markets have
pointed toward their being semi-strong-form ecient.
A study by Khan of the grain futures market indicated
semi-strong form eciency following the release of large
trader position information (Khan, 1986). Studies by
Firth (1976, 1979, and 1980) in the United Kingdom
have compared the share prices existing after a takeover
announcement with the bid oer. Firth found that the
share prices were fully and instantaneously adjusted to
their correct levels, thus concluding that the UK stock
market was semi-strong-form ecient. However, the
markets ability to eciently respond to a short term,
widely publicized event such as a takeover announcement
does not necessarily prove market eciency related to
other more long term, amorphous factors. David Dreman
has criticized the evidence provided by this instant ecient response, pointing out that an immediate response
is not necessarily ecient, and that the long-term performance of the stock in response to certain movements are
better indications.

2 Theoretical background
Beyond the normal utility maximizing agents, the
ecient-market hypothesis requires that agents have
rational expectations; that on average the population is
correct (even if no one person is) and whenever new relevant information appears, the agents update their expectations appropriately. Note that it is not required that the
agents be rational. EMH allows that when faced with
new information, some investors may overreact and some
may underreact. All that is required by the EMH is that
investors reactions be random and follow a normal distribution pattern so that the net eect on market prices
cannot be reliably exploited to make an abnormal prot,
especially when considering transaction costs (including
commissions and spreads). Thus, any one person can be
wrong about the marketindeed, everyone can bebut
the market as a whole is always right. There are three
common forms in which the ecient-market hypothesis is
commonly statedweak-form eciency, semi-strongform eciency and strong-form eciency, each of
which has dierent implications for how markets work.

2.1 Weak-form eciency

In weak-form eciency, future prices cannot be predicted by analyzing prices from the past. Excess returns
cannot be earned in the long run by using investment
strategies based on historical share prices or other his-

2.3

Strong-form eciency

torical data. Technical analysis techniques will not be

able to consistently produce excess returns, though some
forms of fundamental analysis may still provide excess returns. Share prices exhibit no serial dependencies, meaning that there are no patterns to asset prices. This implies that future price movements are determined entirely
by information not contained in the price series. Hence,
prices must follow a random walk. This 'soft' EMH does
not require that prices remain at or near equilibrium, but
only that market participants not be able to systematically prot from market 'ineciencies'. However, while
EMH predicts that all price movement (in the absence of
change in fundamental information) is random (i.e., nontrending), many studies have shown a marked tendency
for the stock markets to trend over time periods of weeks
or longer[21] and that, moreover, there is a positive correlation between degree of trending and length of time
period studied (but note that over long time periods, the
trending is sinusoidal in appearance).[22] Various explanations for such large and apparently non-random price
movements have been promulgated.

3
strong-form eciency implies that neither fundamental
analysis nor technical analysis techniques will be able to
reliably produce excess returns. To test for semi-strongform eciency, the adjustments to previously unknown
news must be of a reasonable size and must be instantaneous. To test for this, consistent upward or downward
adjustments after the initial change must be looked for.
If there are any such adjustments it would suggest that investors had interpreted the information in a biased fashion
and hence in an inecient manner.

2.3 Strong-form eciency

In strong-form eciency, share prices reect all information, public and private, and no one can earn excess
returns. If there are legal barriers to private information becoming public, as with insider trading laws, strongform eciency is impossible, except in the case where
the laws are universally ignored. To test for strong-form
eciency, a market needs to exist where investors cannot consistently earn excess returns over a long period of
time. Even if some money managers are consistently observed to beat the market, no refutation even of strongform eciency follows: with hundreds of thousands of
fund managers worldwide, even a normal distribution of
returns (as eciency predicts) should be expected to produce a few dozen star performers.

There is a vast literature in academic nance dealing

with the momentum eect identied by Jegadeesh and
Titman.[23][24] Stocks that have performed relatively well
(poorly) over the past 3 to 12 months continue to do well
(poorly) over the next 3 to 12 months. The momentum
strategy is long recent winners and shorts recent losers,
and produces positive risk-adjusted average returns. Being simply based on past stock returns, the momentum
eect produces strong evidence against weak-form market eciency, and has been observed in the stock returns 3 Criticism and behavioral nance
of most countries, in industry returns, and in national equity market indices. Moreover, Fama has accepted that
Investors, including the likes of Warren Buett,[33]
momentum is the premier anomaly[25][26]
and researchers have disputed the ecient-market hyThe problem of algorithmically constructing prices which pothesis both empirically and theoretically. Behavioral
reect all available information has been studied exten- economists attribute the imperfections in nancial
sively in the eld of computer science.[27][28]
markets to a combination of cognitive biases such
A novel approach for testing the weak form of the E- as overcondence, overreaction, representative bias,
cient Market Hypothesis is using quantifers derived from information bias, and various other predictable human erInformation Theory. In this line, Zunino et al.[29] found rors in reasoning and information processing. These have
that informational eciency is related to market size and been researched by psychologists such as Daniel Kahnethe stage of development of the economy. Using a sim- man, Amos Tversky, Richard Thaler, and Paul Slovic.
ilar technique, Bariviera et al.[30] uncover the impact of These errors in reasoning lead most investors to avoid
important economic events on informational eciency. value stocks and buy growth stocks at expensive prices,
The methodology proposed by econophysicists Zunino, which allow those who reason correctly to prot from barBariviera and coauthors is new and alternative to usual gains in neglected value stocks and the overreacted selling
econometric techniques, and is able to detect changes of growth stocks. Investors prefer riskier funds in spring
[34]
in the stochastic and or chaotic underlying dynamics of and safer funds in autumn.
prices time series.
Empirical evidence has been mixed, but has gener-

2.2

Semi-strong-form eciency

In semi-strong-form eciency, it is implied that share

prices adjust to publicly available new information very
rapidly and in an unbiased fashion, such that no excess returns can be earned by trading on that information. Semi-

ally not supported strong forms of the ecient-market

hypothesis[9][10][35] According to Dreman and Berry, in
a 1995 paper, low P/E stocks have greater returns.[36] In
an earlier paper Dreman also refuted the assertion by Ray
Ball that these higher returns could be attributed to higher
beta,[37] whose research had been accepted by ecient
market theorists as explaining the anomaly[38] in neat accordance with modern portfolio theory.

3 CRITICISM AND BEHAVIORAL FINANCE

at bargain prices. Rational investors have diculty profiting by shorting irrational bubbles because, in the words
of a famous saying attributed to John Maynard Keynes,
Markets can stay irrational longer than you can stay
solvent.[41] Sudden market crashes as happened on Black
Monday in 1987 are mysterious from the perspective of
ecient markets, but allowed as a rare statistical event
under the weak-form of EMH. Benoit Mandelbrot has
argued that market bubbles are not anomalous but rather
characteristic of price dynamics described by power laws
such as Pareto, Zipf[42] or Tracy-Widom[43] combined
with persistence in price change trends.[44]

Burton Malkiel has warned that certain emerging markets such as China are not empirically ecient; that
the Shanghai and Shenzhen markets, unlike markets
Price-Earnings ratios as a predictor of twenty-year returns based
in United States, exhibit considerable serial correla[31]
upon the plot by Robert Shiller (Figure 10.1,
source). The
non-random walk, and evidence of
horizontal axis shows the real price-earnings ratio of the S&P tion (price trends),
[45]
manipulation.
Composite Stock Price Index as computed in Irrational Exuberance (ination adjusted price divided by the prior ten-year mean
of ination-adjusted earnings). The vertical axis shows the geometric average real annual return on investing in the S&P Composite Stock Price Index, reinvesting dividends, and selling twenty
years later. Data from dierent twenty-year periods is colorcoded as shown in the key. See also ten-year returns. Shiller
states that this plot conrms that long-term investorsinvestors
who commit their money to an investment for ten full yearsdid
do well when prices were low relative to earnings at the beginning of the ten years. Long-term investors would be well advised,
individually, to lower their exposure to the stock market when it
is high, as it has been recently, and get into the market when it is
low.[31] Burton Malkiel, a well-known proponent of the general
validity of EMH, stated that this correlation may be consistent
with an ecient market due to dierences in interest rates.[32]

3.2 Behavioral psychology

One can identify losers as stocks that have had poor returns over some number of past years. Winners would
be those stocks that had high returns over a similar period. The main result of one such study is that losers have
much higher average returns than winners over the following period of the same number of years.[39] A later
study showed that beta () cannot account for this difference in average returns.[40] This tendency of returns to
reverse over long horizons (i.e., losers become winners)
is yet another contradiction of EMH. Losers would have
to have much higher betas than winners in order to jusDaniel Kahneman
tify the return dierence. The study showed that the beta
dierence required to save the EMH is just not there.
Behavioral psychology approaches to stock market trading are among some of the more promising alternatives to
EMH (and some investment strategies seek to exploit ex3.1 Economic bubbles and irrational exu- actly such ineciencies). But Nobel Laureate co-founder
berance
of the programme Daniel Kahneman announced his
skepticism of investors beating the market: They're [inSpeculative economic bubbles are an obvious anomaly, vestors] just not going to do it [beat the market]. Its
in that the market often appears to be driven by buy- just not going to happen.[46] Indeed, defenders of EMH
ers operating on escalating market sentiment/ irrational maintain that Behavioral Finance strengthens the case
exuberance, who take little notice of underlying value. for EMH in that it highlights biases in individuals and
These bubbles are typically followed by an overreaction committees and not competitive markets. For example,
of frantic selling, allowing shrewd investors to buy stocks one prominent nding in Behaviorial Finance is that in-

5
dividuals employ hyperbolic discounting. It is demonstrably true that bonds, mortgages, annuities and other
similar nancial instruments subject to competitive market forces do not. Any manifestation of hyperbolic discounting in the pricing of these obligations would invite
arbitrage thereby quickly eliminating any vestige of individual biases. Similarly, diversication, derivative securities and other hedging strategies assuage if not eliminate
potential mispricings from the severe risk-intolerance
(loss aversion) of individuals underscored by behavioral
nance. On the other hand, economists, behaviorial psychologists and mutual fund managers are drawn from
the human population and are therefore subject to the
biases that behavioralists showcase. By contrast, the
price signals in markets are far less subject to individual biases highlighted by the Behavioral Finance programme. Richard Thaler has started a fund based on his
research on cognitive biases. In a 2008 report he identied complexity and herd behavior as central to the global
nancial crisis of 2008.[47]

Economist John Quiggin has claimed that "Bitcoin is perhaps the nest example of a pure bubble, and that it provides a conclusive refutation of EMH.[51] While other assets used as currency (such as gold, tobacco and U.S. dollars) have value independent of peoples willingness to
accept them as payment, Quiggin argues that in the case
of Bitcoin there is no source of value whatsoever and
that:
Since Bitcoins do not generate any actual
earnings, they must appreciate in value to ensure that people are willing to hold them. But
an endless appreciation, with no ow of earnings or liquidation value, is precisely the kind
of bubble the EMH says cant happen.

In 2013, Kim Man Lui pointed out that there is dierence

of performance between experienced and novice traders
in a controlled experiment. If the market really walks randomly, there should be no dierence between these two
Further empirical work has highlighted the impact trans- kinds of traders. However, traders who are more knowlaction costs have on the concept of market eciency, edgeable on technical analysis signicantly outperform
[52]
with much evidence suggesting that any anomalies per- those who are less knowledgeable.
taining to market ineciencies are the result of a cost Tshilidzi Marwala surmised that articial intelligence inbenet analysis made by those willing to incur the cost uences the applicability of the theory of the ecient
of acquiring the valuable information in order to trade on market hypothesis in that the more articial intelligence
it. Additionally the concept of liquidity is a critical com- infused computer traders there are in the markets as
ponent to capturing ineciencies in tests for abnormal traders the more ecient the markets become., ,
returns. Any test of this proposition faces the joint hypothesis problem, where it is impossible to ever test for Warren Buett has also argued against EMH, most nomarket eciency, since to do so requires the use of a tably in his 1984 presentation The Superinvestors of
measuring stick against which abnormal returns are com- Graham-and-Doddsville, saying the preponderance of
pared one cannot know if the market is ecient if one value investors among the worlds best money mandoes not know if a model correctly stipulates the required agers rebuts the claim of EMH proponents that luck is
some investors appear more successful than
rate of return. Consequently, a situation arises where ei- the reason
[53]
others.
As
Malkiel[54] has shown, over the 30 years
ther the asset pricing model is incorrect or the market is
inecient, but one has no way of knowing which is the (to 1996) more than two-thirds of professional portfolio
managers have been outperformed by the S&P 500 Index
case.
(and, more to the point, there is little correlation between
The performance of stock markets is correlated with the those who outperform in one year and those who outperamount of sunshine in the city where the main exchange form in the next.)
is located.[48]
A key work on random walk was done in the late 1980s
by Profs. Andrew Lo and Craig MacKinlay; they eectively argue that a random walk does not exist, nor ever
has.[49] Their paper took almost two years to be accepted
by academia and in 1999 they published A Non-random
Walk Down Wall St. which collects their research papers
on the topic up to that time.

3.3

View of some economists

Economists Matthew Bishop and Michael Green claim

that full acceptance of the hypothesis goes against the
thinking of Adam Smith and John Maynard Keynes, who
both believed irrational behavior had a real impact on the
markets.[50]

4 Late 2000s nancial crisis

The nancial crisis of 200708 led to renewed scrutiny
and criticism of the hypothesis.[55] Market strategist
Jeremy Grantham stated atly that the EMH was responsible for the current nancial crisis, claiming that belief in the hypothesis caused nancial leaders to have a
chronic underestimation of the dangers of asset bubbles
breaking.[4] Noted nancial journalist Roger Lowenstein blasted the theory, declaring The upside of the
current Great Recession is that it could drive a stake
through the heart of the academic nostrum known as
the ecient-market hypothesis.[5] Former Federal Reserve chairman Paul Volcker chimed in, saying its clear
that among the causes of the recent nancial crisis was

7 NOTES

an unjustied faith in rational expectations [and] market

eciencies.[56] By 20072009, you had to be a fanatic
to believe in the literal truth of the EMH, noted one nancial analyst.[57]
At the International Organization of Securities Commissions annual conference, held in June 2009, the hypothesis took center stage. Martin Wolf, the chief economics
commentator for the Financial Times, dismissed the hypothesis as being a useless way to examine how markets
function in reality. Paul McCulley, managing director of
PIMCO, was less extreme in his criticism, saying that the
hypothesis had not failed, but was seriously awed in
its neglect of human nature.[58][59]
The nancial crisis led Richard Posner, a prominent
judge, University of Chicago law professor, and innovator in the eld of Law and Economics, to back
away from the hypothesis and express some degree
of belief in Keynesian economics. Posner accused
some of his Chicago School colleagues of being asleep
at the switch, saying that the movement to deregulate the nancial industry went too far by exaggerating
the resiliencethe self healing powersof laissez-faire
capitalism.[60] Others, such as Fama, said that the hypothesis held up well during the crisis and that the markets were a casualty of the recession, not the cause of it.
Despite this, Fama has conceded that poorly informed
investors could theoretically lead the market astray and
that stock prices could become somewhat irrational as
a result.[61]
Critics have suggested that nancial institutions and corporations have been able to reduce the eciency of nancial markets by creating private information and reducing the accuracy of conventional disclosures, and by developing new and complex products which are challenging for most market participants to evaluate and correctly
price.[62][63]

Ecient markets applied in securities class action litigation

6 See also
Adaptive market hypothesis
Dumb agent theory
Index fund
Insider trading
Investment theory
Noisy market hypothesis
Microeconomics
Perfect market
Transparency (market)
2008-2009 Keynesian resurgence

7 Notes
[1] http://www.investopedia.com/articles/basics/04/022004.
asp
[2] Fama and French 2012
[3] Fox, Justin (2009). Myth of the Rational Market. Harper
Business. ISBN 0-06-059899-9.
[4] Nocera, Joe (5 June 2009). Poking Holes in a Theory on
Markets. New York Times. Retrieved 8 June 2009.
[5] Lowenstein, Roger (7 June 2009). Book Review: 'The
Myth of the Rational Market' by Justin Fox. Washington
Post. Retrieved 5 August 2011.
[6] Desai, Sameer (27 March 2011). Ecient Market Hypothesis. Retrieved 2 June 2011.
[7] Kirman, Alan. "Economic theory and the crisis. Voxeu.
14 November 2009.
[8] See Working (1934), Cowles and Jones (1937), and
Kendall (1953), and later Brealey, Dryden and Cunningham.
[9] Empirical papers questioning EMH:

Francis Nicholson. Price-Earnings Ratios in RelaThe theory of ecient markets has been practically aption to Investment Results. Financial Analysts Jourplied in the eld of Securities Class Action Litigation.
nal.
Jan/Feb 1968:105109.
Ecient market theory, in conjunction with "Fraud on
Basu, Sanjoy (1977). Investment Performance
the Market Theory, has been used in Securities Class
of Common Stocks in Relation to Their PriceAction Litigation to both justify and as mechanism for
Earnings Ratios: A test of the Ecient Markets
the calculation of damages.[64] In the Supreme Court
Hypothesis. Journal of Finance. 32: 663682.
Case, Halliburton v. Erica P. John Fund, U.S. Supreme
doi:10.1111/j.1540-6261.1977.tb01979.x.
Court, No. 13-317, the use of ecient market theory in

Rosenberg B, Reid K, Lanstein R. (1985). Persuasupporting securities class action litigation was armed.
sive Evidence of Market Ineciency. Journal of
Supreme Court Justice Roberts wrote that the courts
Portfolio Management 13:917.
ruling was consistent with the ruling in Basic because
it allows direct evidence when such evidence is avail- [10] Fama, E; French, K (1992). The Cross-Section of Exable instead of relying exclusively on the ecient marpected Stock Returns. Journal of Finance. 47: 427465.
doi:10.1111/j.1540-6261.1992.tb04398.x.
kets theory.[65]

[11] Cootner (ed.), Paul (1964). The Random Character of

StockMarket Prices. MIT Press.
[12] Fama, Eugene (1965). The Behavior of Stock Market Prices.
Journal of Business.
38: 34105.
doi:10.1086/294743.
[13] Samuelson, Paul (1965). Proof That Properly Anticipated Prices Fluctuate Randomly. Industrial Management Review. 6: 4149.

[28] Vazirani, Vijay V.; Nisan, Noam; Roughgarden, Tim;

Tardos, va (2007). Algorithmic Game Theory (PDF).
Cambridge, UK: Cambridge University Press. ISBN 0521-87282-0.
[29] Zunino, L.; Bariviera, A.F.; Guercio, M.B; Martinez, L.B.; Rosso, O.A. On the eciency of
sovereign bond markets. Physica A. 391: 4342
4349. doi:10.1016/j.physa.2012.04.009.

[15] Collin Read. The Ecient Market Hypothesists: Bachelier,

Samuelson, Fama, Ross, Tobin, and Shiller.

[30] Bariviera, A.F.; Zunino, L; Guercio, M.B.; Martinez,

L.B.; Rosso, O.A. (2014).
Revisiting the European sovereign bonds with a permutation-informationtheory approach. Eur. Phys. J. B. 86: 509.
doi:10.1140/epjb/e2013-40660-7.

[16] The ecient market hypothesis: problems with interpretations of empirical tests.

[31] Shiller, Robert (2005). Irrational Exuberance (2d ed.).

Princeton University Press. ISBN 0-691-12335-7.

[17] Fama, Eugene (1970). Ecient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance. 25 (2): 383417. doi:10.2307/2325486. JSTOR
2325486.

[32] Burton G. Malkiel (2006). A Random Walk Down Wall

Street. ISBN 0-393-32535-0. p.254.

[14] Market Sense and Nonsense: How the Markets Really

Work (and How They Don't) - Jack D. Schwager

[18] Jung, Jeeman; Shiller, Robert (2005). Samuelsons Dictum And The Stock Market. Economic Inquiry. 43 (2):
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[19] Fidelity. 2015 Stock Market Outlook, a sample outlook
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[20] McKinsey Insights & Publications. Insights & Publications.
[21] Saad, Emad W., Student Member, IEEE; Prokhorov,
Danil V. Member , IEEE; and Wunsch,II, Donald C.
Senior Member, IEEE (November 1998). Comparative Study of Stock Trend Prediction Using Time Delay, Recurrent and Probabilistic Neural Networks. IEEE
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[22] Granger, Clive W. J.; Morgenstern, Oskar (5 May
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[23] Jegadeesh, N; Titman, S (1993). Returns to Buying
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[33] http://www.businessinsider.com/
warren-buffett-on-efficient-market-hypothesis-2010-12
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External links
e-m-h.org
Earnings Quality and the Equity Risk Premium:
A Benchmark Model abstract from Contemporary
Accounting Research
As The Index Fund Moves from Heresy to Dogma
. . . What More Do We Need To Know?" Remarks
by John Bogle on the superior returns of passively
managed index funds.
There is no chaos in stock markets. A skeptical view
of Rescaled Range Analysis of stock returns.
Proof That Properly Discounted Present Values of
Assets Vibrate Randomly Paul Samuelson
Human Behavior and the Eciency of the Financial System (1999) by Robert J. Shiller Handbook
of Macroeconomics

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