The Efficient Market Hypothesis参考.ppt

CHAPTER 12 Behavioral Finance and Technical Analysis * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Consistency, the “hot hands” phenomenon Carhart – weak evidence of persistency Bollen and Busse – support for performance persistence over short time horizons Berk and Green – skilled managers will attract new funds until the costs of managing those extra funds drive alphas down to zero. Mutual Fund Performance Figure 11.8 Risk-adjusted performance in ranking quarter and following quarter So, Are Markets Efficient? The performance of professional managers is broadly consistent with market efficiency. Most managers do not do better than the passive strategy. There are, however, some notable superstars: Peter Lynch, Warren Buffett, John Templeton, George Soros Behavioral Finance Conventional Finance Prices are correct; equal to intrinsic value. Resources are allocated efficiently. Consistent with EMH Behavioral Finance What if investors don’t behave rationally? The Behavioral Critique Two categories of irrationalities: Investors do not always process information correctly. Result: Incorrect probability distributions of future returns. Even when given a probability distribution of returns, investors may make inconsistent or suboptimal decisions. Result: They have behavioral biases. Errors in Information Processing: Misestimating True Probabilities Forecasting Errors: Too much weight is placed on recent experiences. Overconfidence: Investors overestimate their abilities and the precision of their forecasts. Conservatism: Investors are slow to update their beliefs and under react to new information. Sample Size Neglect and Representativeness: Investors are too quick to infer a pattern or trend from a small sample. Behavioral Biases Biases result in less than rational decisions, even with perfect information. Examples: Framing: How the risk is described, “risky losses” vs. “risky gains”, can affect investor decisions. Behavioral Biases Me