The EMH‚ the Financial Crisis and the Behavioral Finance 1. Introduction The Efficient Market Hypothesis (EMH) that was first proposed by Fama (1965‚ 1970) is the cornerstone of the modern financial economic theory. The EMH argues that the market is efficient and asset price reflects all the relevant information concerned about its return. The genius insight provided by the EMH has changed the way we look at the financial crisis thoroughly. However‚ the confidence in the EMH is eroded by the
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CHAPTER 12: BEHAVIORAL FINANCE AND TECHNICAL ANALYSIS PROBLEM SETS 1. Technical analysis can generally be viewed as a search for trends or patterns in market prices. Technical analysts tend to view these trends as momentum‚ or gradual adjustments to ‘correct’ prices‚ or‚ alternatively‚ reversals of trends. A number of the behavioral biases discussed in the chapter might contribute to such trends and patterns. For example‚ a conservatism bias might contribute to a trend in prices as
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The potential contributions of behavioral finance to Post Keynesian and institutionalist finance theories Abstract: In their paper “Behavioral Finance and Post Keynesian–Institutionalist Theories of Financial Markets‚” Raines and Leathers discuss how the theories of Keynes‚ Davidson‚ and Galbraith could explain financial bubbles and crises and show how those theories are both confirmed by actual events and supported by some findings in behavioral finance. The current paper comments on their
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1. INTRODUCTION The phenomena of calendar effects in stock markets seem to be a center of curiosity for many researchers across the world. Following many studies about the significance of calendar anomalies‚ testing the presence of Monday effect and January effect appears to be an area of interest. The aim of this study is to discuss about calendar anomalies and its significance. It should be noted that the study will focus mainly on Monday effect and January effect on the stock returns of companies
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Efficient Market Hypothesis And Behavioral Finance – Is A Compromise In Sight? By Nikolai Chuvakhin Legend has it that once upon the time two economists were walking together when one of them saw something that struck his mind. “Look‚” he exclaimed‚ “here’s a great research topic!” “Nonsense‚” the other one said‚ “If it were‚ someone would have written a paper on it by now.” For a long time this attitude governed the view of economists toward the stock market. Economists simply believed that
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Bias Indiana Wesleyan University School of Business and Leadership MGMT- 515: Business Communication Dr. Jeff Boyce Cognitive Bias The cognitive bias that affects my critical decision making processes is the Hindsight and Curse of Knowledge bias. I predict outcomes without acknowledging the correct outcome. I often use this bias when I watch sports. I am an avid fan of basketball‚ and I typically like to predict the outcome of games and even the entire season. Cognitive bias is processing
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Case Report HelloWallet Q1: How do the concepts of behavioural finance create opportunities for HelloWallet? Private pensions are shifting more and more from defined benefit to defined contribution plans. This results in the shifting of responsibility for asset accumulation from the employers to the employees. As of 2008‚ the ratio of DC to DB pension plans is 3:1. Therefore‚ there will be more investors required
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Essay: The Bias of Language‚ the Bias of Pictures Essay Author: Neil Postman and Steve Powers Section I: Analysis of theme 1. Misleading Language -"This means that there is a level of language whose purpose is to describe an event. There is also a level of language whose purpose is to evaluate an event. Even more‚ there is a level of language whose purpose is to infer what is unknown on the basis of what is known."(243:1) 2. Misleading Pictures -"The picture documents and celebrates the
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Gender Bias in Education by Amanda Chapman of D ’Youville College "Sitting in the same classroom‚ reading the same textbook‚ listening to the same teacher‚ boys and girls receive very different educations." (Sadker‚ 1994) In fact‚ upon entering school‚ girls perform equal to or better than boys on nearly every measure of achievement‚ but by the time they graduate high school or college‚ they have fallen behind. (Sadker‚ 1994) However‚ discrepancies between the performance of girls and the performance
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Behavioural finance Understanding how the mind can help or hinder investment success By Alistair Byrne With Stephen P Utkus For investment professionals only – not for retail investors. 1 Why bother with behavioural finance? This document aims to provide a practical introduction to general tenents of behavioural finance and highlights the potential lessons for successful investing. The behavioural biases discussed in this guide are ingrained aspects of human decision-making
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