The Contradiction Between Asset Bubbles and Efficient Markets
No Thumbnail Available
Journal Title
Journal ISSN
Volume Title
School of Business |
Bachelor's thesis
Electronic archive copy is available locally at the Harald Herlin Learning Centre. The staff of Aalto University has access to the electronic bachelor's theses by logging into Aaltodoc with their personal Aalto user ID. Read more about the availability of the bachelor's theses.
Author
Date
2018
Department
Major/Subject
Mcode
Degree programme
Taloustiede
Language
en
Pages
28
Series
Abstract
This literature review clarifies the theories behind market efficiency, and why the existence of asset bubbles is in contradiction with them. Market efficiency and asset pricing have been studies for many decades, but the results still divide economists. This literature review addresses the arguments in favor and against market efficiency. I will analyze the results from research regarding the topic, and also ad-dress the difficulties when testing market efficiency. This literature review explains why markets are not strong form efficient and gives also arguments against semi-strong and weak forms of market efficiency. This review also addresses the importance of continuing studying behavioral economics and finance, since the past has shown the magnitude of the impact to global economy caused by asset bubbles when they concern also the regular people instead of just investors. It is wrong to think that investors won't repeat the mistakes done in the past, as is shown with examples from real events.Description
Thesis advisor
Murto, PauliKeywords
market efficiency, stock markets, asset bubbles, anomalies, housing markets, efficient market theory, random walk
