Chapter 7: Stock Price Behavior and Market Efficiency

In the Chapter 7 module, you will 

  • Be introduced to the concepts and theories of market efficiency
  • Discuss the difficulties involved in "beating the market"
  • Examine market manias (a.k.a. bubbles) and market crashes and the behaviors of investors
  • Reexamine the advantages and disadvantages of passive (a.k.a. index) investing and active management
  • Review famous and infamous investors and their characteristics
  • Be introduced to famous myths and stupid sayings

By the end of this module, you should be able to

  1. Identify the three main efficient market hypotheses and the random walk hypothesis
  2. Describe the characteristics of market manias (a.k.a. bubbles) and market crashes and the behavior of unintelligent and irrational investors during manias and crashes  
  3. Describe the characteristics of intelligent, long-term oriented investors during manias and crashes
  4. Compare and contrast passive (a.k.a. index) investing versus active management
  5. Relate some of the more famous myths and stupid market sayings 

Presentation File and Study Guide

Presentation file - Study guide 

Are Markets Efficient?  Can Investors "Beat the Market?"

This chapter discusses the various theories about market efficiency.  The proponents of the efficient market theories believe that no one can "beat the market."  The fly in their ointment is that there are many investors who have beaten the market over statistically significant periods of time.  After reviewing the efficient market theories, we will take a look at just a few of those successful investors who have proven that the efficient market theories are wrong.  We will then end with a few famous market myths and stupid sayings.  Enjoy!  

Audio Links to an external site. - Youtube Links to an external site.

For Your Enjoyment

New York Times says that women are better investors than men! Links to an external site. - And CNN agrees. Links to an external site.
Wise advice: Do the opposite of what everyone else is doing! Links to an external site.  The 2000's were a rough decade for investors.
Politics & the Markets Links to an external site.  "Poli-" means "many" and "-tics" are blood sucking insects.