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Proximity Bias in Investors’ Portfolio Choice pp 61–82Cite as

Palgrave Macmillan

Market Efficiency and the Standard Asset Pricing Models Used to Test Market Efficiency

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Abstract

This chapter reviews the efficient market hypothesis (EMH), proposed by Fama in 1970s. We discuss and exemplify the applications of the hypothesis that the equities are perfectly priced according to their characteristics, meaning that the market prices reflect the information made available to investors at any given time. The main focus of the chapter is to explore the relevance of the efficient market theory to the proximity-biased investors. We also review the standard asset pricing models used to test EMH.

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Authors and Affiliations

  1. University of Gothenburg, Gothenburg, Sweden

    Ted Lindblom, Taylan Mavruk & Stefan Sjögren

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  1. Ted Lindblom
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  2. Taylan Mavruk
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  3. Stefan Sjögren
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Correspondence to Ted Lindblom .

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Lindblom, T., Mavruk, T., Sjögren, S. (2017). Market Efficiency and the Standard Asset Pricing Models Used to Test Market Efficiency. In: Proximity Bias in Investors’ Portfolio Choice. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-54762-6_4

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  • DOI: https://doi.org/10.1007/978-3-319-54762-6_4

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-54761-9

  • Online ISBN: 978-3-319-54762-6

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