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
  • The market crash of October 1987
  • The internet bubble of the late 1990s
  • Other illustrations of irrational pricing
conclusion
Conclusion
  • 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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