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IOARP Journal of Management and Leadership

Analysis of Efficient Market Hypothesis and Behavioral Finance


Emine Beyza Arikan, Bernd Sanger, Mehul Mehta


The efficient market hypothesis suggests that at any given time in a capital market, the prices of stock reflect all available information. Hypothesis implies that it is impossible to beat the market because the market price always incorporates all the relevant information that may influence the price of a stock. Some researchers, based on the historic evidence, contradict with this hypothesis and challenge the presence of a perfect rationale behind the hypothesis. Behavioural finance on the other hand combines behavioural and cognitive psychological theory with economics and finance to provide explanations behind the irrational financial decisions investors make. Using these theories, behavioural finance explains stock market anomalies such as severe rises or falls in stock price. Behavioural finance assumes that both information structure and the characteristics of market investors influence investment decision of the individuals. This paper provides a thorough analysis of efficient market hypothesis and behavioural finance by taking into account the literature and market statistics.

Efficient Market Hypothesis, Behavioural Finance, Investor Behaviour, Stock Markets

IOARP Journal of Management and Leadership
Volume 2
Issue 2, June 2017
30 June 2017
IOARP Journal of Management and Leadership (JML)
15 July 2017
21 - 28
IDL-JML02-003
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