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Alphanomics: The Informational Underpinnings of Market Efficiency
Author(s): Charles M. C. Lee;Eric C. So
Source: Journal:Foundations and Trends® in Accounting ISSN Print:1554-0642, ISSN Online:1554-0650 Publisher:Now Publishers Volume 9 Number 2-3, Pages: 200(59-258) DOI: 10.1561/1400000022 Keywords: Market efficiency;Active investing;Valuation;Financial markets;Rationality;Investor sentiment;Noise trader
Abstract:
This monograph is a compact introduction to empirical research on market efficiency, behavioral finance, and fundamental analysis. The first section reviews the evolution of academic thinking on market efficiency. Section 2 introduces the noise trader model as an alternative framework for market-related research. Section 3 surveys the growing literature on the causes and consequences of investor sentiment. Section 4 examines the role of fundamental analysis in value investing. Section 5 contains a survey of the literature on arbitrage costs and constraints, and Section 6 discusses research methodology issues associated with the need to distinguish between mispricing from risk.
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