The efficient market hypothesis and its critics burton g malkiel 2003
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The Efficient Market Hypothesis and Its Critics Burton G. Malkiel (2003). Presented by: Septian Bayu K. 0806479080. Outline. Introduction A Nonrandom Walk Down Wall Street Predictable Pattern Based on Valuation Parameters

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The efficient market hypothesis and its critics burton g malkiel 2003

The Efficient Market Hypothesis and Its CriticsBurton G. Malkiel (2003)

Presented by:

Septian Bayu K. 0806479080


Outline
Outline

  • Introduction

  • A Nonrandom Walk Down Wall Street

  • Predictable Pattern Based on Valuation Parameters

  • Cross-Sectional Predictable Patterns Based on Firm Characteristics and Valuation Parameters

  • Seeming Irrefutable Cases of Inefficiency

  • The performance of Professional Investors

  • Conclusion


Introduction
Introduction

  • Accepting EMH

  • EMH and random walk

  • Intellectual dominance

  • Paper examination


A nonrandom walk down wall street
A Nonrandom Walk Down Wall Street

  • Short term momentum, including underreaction to new information

  • Long run return reversal

  • Seasonal and day-of-the-week patterns


Predictable patterns based on valuation parameters 1
Predictable Patterns Based on Valuation Parameters (1)

  • Predicting future returns from initial dividends yields (exhibit 1.1)

  • Predicting market returns from initial price-earnings multiples (exhibit 1.2)

  • Other predictable time series patterns




Cross sectional predictable patterns based on firm characteristics and valuation parameters 1
Cross-Sectional Predictable Patterns Based on Firm Characteristics and Valuation Parameters (1)

  • The size effect (exhibit 2)

  • Value stocks (exhibit 3)

  • The equity risk premium puzzle

  • Summarizing the “anomalies” and predictable patterns


Cross sectional predictable patterns based on firm characteristics and valuation parameters 2
Cross-Sectional Predictable Patterns Based on Firm Characteristics and Valuation Parameters (2)

  • Exhibit 2


Cross sectional predictable patterns based on firm characteristics and valuation parameters 3
Cross-Sectional Predictable Patterns Based on Firm Characteristics and Valuation Parameters (3)

  • Exhibit 3


Seemingly irrefutable cases of inefficiency
Seemingly Irrefutable Cases of Inefficiency Characteristics and Valuation Parameters (3)

  • The market crash of October 1987

  • The internet bubble of the late 1990s

  • Other illustrations of irrational pricing


The performance of professional investors 1
The Performance of Professional Investors (1) Characteristics and Valuation Parameters (3)

  • Exhibit 4


The performance of professional investors 2
The Performance of Professional Investors (2) Characteristics and Valuation Parameters (3)

  • Exhibit 5


The performance of professional investors 3
The Performance of Professional Investors (3) Characteristics and Valuation Parameters (3)

  • Exhibit 6


The performance of professional investors 4
The Performance of Professional Investors (4) Characteristics and Valuation Parameters (3)

  • Exhibit 7


The performance of professional investors 5
The Performance of Professional Investors (5) Characteristics and Valuation Parameters (3)

  • Exhibit 8


The performance of professional investors 6
The Performance of Professional Investors (6) Characteristics and Valuation Parameters (3)

  • Exhibit 9


Conclusion
Conclusion Characteristics and Valuation Parameters (3)

  • Market cannot be perfectly efficient

  • Whatever patterns or irrationalities, they are unlikely to persist would not provide extraordinary returns for investor


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