Behavioral Finance - Introduction to Market Efficiency
What you'll learn
- How behavioral finance questions the efficient market hypothesis.
- Understand the three forms of market efficiency and the persistent joint hypothesis problem.
- Learn about Ten Main Challenges to Market Efficiency (aka Market Anomalies). We learn about each anomaly, how it challenges market efficiency, and how to use it
- Learn about the anatomy of an asset bubble and explore various examples.
Requirements
- There are no formal requirements for this course, though this course is generally taught at the undergraduate university level.
Description
Are markets efficient? The answer to this question is not as simple as "yes" or "no". This course unpacks the various forms of market efficiency and outlines ten popular market efficiency challenges (anomalies). We conclude by discussing how to act on these results based on your new beliefs.
Course Outline
Capital Asset Pricing Model Review
Begin to Question some of the efficient market assumptions
Three Forms of Market Efficiency
Joint Hypothesis Problem
Ten Challenges to Market Efficiency - We discuss each anomaly, explain why each challenges market efficiency, and conclude with best practices on how to invest in each strategy if you believe the anomaly to maintain its excess returns in the future.
1. Small vs. large cap stocks
2. Value vs. Growth Stocks
3. Price/Earnings ratios
4. Momentum Investing
5. Contrarian Investing
6. Earnings Announcement Momentum
7. Weekend and Monday effects
8.+9. Turn-of-the-month (and year) effects
10. Holiday and Halloween effects
Section 3: We also discuss the anatomy of a bubble, limits to arbitrage exploitation and conclude with how to use this information in building your own investing philosophy and strategies.
If you are interesting in better understanding financial markets and stocks trading strategies, this course is for you!
Who this course is for:
- Individual investors and financial professionals would benefit from this mini-course.
Instructor
- 4.9 Instructor Rating
- 10 Reviews
- 19 Students
- 2 Courses
Dr. Foltice is an Associate Professor of Finance at Butler University in Indianapolis, Indiana (USA). He specializes in Behavioral Finance and teaches it as an Undergraduate course each semester. He is also the owner and founder of Bryan Foltice - Behavioral Finance LLC, which aims to teach people about behavioral finance in order to make better financial decision.