Behavioral Asset Pricing

behavioural plus set
Seminar Paper to be presented at the behavioural pay-Workshop Supervisor: Prof. Dr. Jens Carsten Jackwerth

Oliver Feix Peter-Rosegger-Weg 23 78464 Konstanz 24.06.2002

Contents
1 Introduction 2 The E?cient Market Hypothesis 3 Does the EMH (Still) Hold? 3.1 The Bad parole for the EMH Supporters . . . . . . . . . . . . . . . . 3.2 The Good News for (and of) EMH Supporters . . . . . . . . . . . . 4 Behavioral Asset Pricing: A Way Out? 5 Behavioral Asset Pricing and Practical Applications 6 Conclusion 1 2 4 5 8 9 13 14

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 over time I believe that the purely keen-sighted image will be subsumed by a broader psychological effigy that includes full rationality as a signi?cant case. -David Hirshleifer (2001) In the end, I think we can hope for a dogged story that (i) relates the cross-section properties of expected returns to the variation of expected returns through and through time, and (ii) relates the behavior of expected returns to the real economy in a rather detailed way. Or we can hope to lead ourselves that no such story is possible. -Eugene F.



Fama (1991)

1

Introduction
1

In a fresh Financial Times article titled Academia runs forth of blockbusters

it

was mentioned that after the Capital Asset Pricing Model (CAPM) and the BlackScholes pickaxe Pricing Model there is a lack of current ideas in the ?nancial world. 20 years ago Behavioral Finance appeared on the investment scene. But since then the academic as well as the practical world of ?nance down faced the major di?culty how to make money out of it. However, Behavioral Finance is very helpful in understanding wherefore prices are as they are or in different words in understanding market anomalies. Due to the enunciate hypothesis problem as proposed by Fama (1970), one cannot provided relate the e?cient market hypothesis to an underlying asset pricing model which has to result in a rational equilibrium. Many of those equilibrium models have been proposed and have worked rather...If you want to stupefy a full essay, order it on our website: Orderessay



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