Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257069 
Year of Publication: 
2020
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 8 [Issue:] 1 [Article No.:] 20 [Publisher:] MDPI [Place:] Basel [Year:] 2020 [Pages:] 1-51
Publisher: 
MDPI, Basel
Abstract: 
The efficient-market hypothesis (EMH) is one of the most important economic and financial hypotheses that have been tested over the past century. Due to many abnormal phenomena and conflicting evidence, otherwise known as anomalies against EMH, some academics have questioned whether EMH is valid, and pointed out that the financial literature has substantial evidence of anomalies, so that many theories have been developed to explain some anomalies. To address the issue, this paper reviews the theory and literature on market efficiency and market anomalies. We give a brief review on market efficiency and clearly define the concept of market efficiency and the EMH. We discuss some efforts that challenge the EMH. We review different market anomalies and different theories of Behavioral Finance that could be used to explain such market anomalies. This review is useful to academics for developing cutting-edge treatments of financial theory that EMH, anomalies, and Behavioral Finance underlie. The review is also beneficial to investors for making choices of investment products and strategies that suit their risk preferences and behavioral traits predicted from behavioral models. Finally, when EMH, anomalies and Behavioral Finance are used to explain the impacts of investor behavior on stock price movements, it is invaluable to policy makers, when reviewing their policies, to avoid excessive fluctuations in stock markets.
Subjects: 
anchoring
anomalies
Behavioral Finance
behavioral models
BM effect
bubbles
calendar anomalies
causality
cointegration
copulas
covariance
Disposition Effect
diversification
dynamic models
EMH
Equity Premium Puzzle
herd effect
indifference curves
market efficiency
Momentum Effect
nonlinearity
ostrich effect
overconfidence
performance measures
portfolio optimization
portfolio selection
risk measures
robust estimation
stochastic dominance
technical analysis
the size effect
trading rules
two-moment decision models
unit root
utility
Winner-Loser Effect
JEL: 
A10
G10
G14
O10
O16
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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