Behavioral Finance - Introduction to Market Efficiency

This course unpacks the various forms of market efficiency and outlines ten popular market efficiency challenges.

Are markets efficient? The answer to this question is not as simple as "yes" or "no". This course unpacks the various forms of market efficiency and outlines ten popular market efficiency challenges (anomalies). We conclude by discussing how to act on these results based on your new beliefs.

Course Outline

• Capital Asset Pricing Model Review

• Begin to Question some of the efficient market assumptions

• Three Forms of Market Efficiency

• Joint Hypothesis Problem

Ten Challenges to Market Efficiency - We discuss each anomaly, explain why each challenges market efficiency, and conclude with best practices on how to invest in each strategy if you believe the anomaly to maintain its excess returns in the future.

1. Small vs. large cap stocks

2. Value vs. Growth Stocks

3. Price/Earnings ratios

4. Momentum Investing

5. Contrarian Investing

6. Earnings Announcement Momentum

7. Weekend and Monday effects

8.+9. Turn-of-the-month (and year) effects

10. Holiday and Halloween effects

Section 3: We also discuss the anatomy of a bubble, limits to arbitrage exploitation and conclude with how to use this information in building your own investing philosophy and strategies.

If you are interesting in better understanding financial markets and stocks trading strategies, this course is for you!