1、INVESTMENTS | BODIE, KANE, MARCUS Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin CHAPTER 11 The Efficient Market Hypothesis INVESTMENTS | BODIE, KANE, MARCUS Maurice Kendall (1953) found no predictable pattern in stock prices. Prices are as likely to go up a
2、s to go down on any particular day. How do we explain random stock price changes? Efficient Market Hypothesis (EMH) INVESTMENTS | BODIE, KANE, MARCUS Efficient Market Hypothesis (EMH) EMH says stock prices already reflect all available information A forecast about favorable future performance leads
3、to favorable current performance, as market participants rush to trade on new information. Result: Prices change until expected returns are exactly commensurate with risk. INVESTMENTS | BODIE, KANE, MARCUS Efficient Market Hypothesis (EMH) New information is unpredictable; if it could be predicted,
4、then the prediction would be part of todays information. Stock prices that change in response to new (unpredictable) information also must move unpredictably. Stock price changes follow a random walk. INVESTMENTS | BODIE, KANE, MARCUS Figure 11.1 Cumulative Abnormal Returns Before Takeover Attempts:
5、 Target Companies INVESTMENTS | BODIE, KANE, MARCUS Figure 11.2 Stock Price Reaction to CNBC Reports INVESTMENTS | BODIE, KANE, MARCUS Information: The most precious commodity on Wall Street Strong competition assures prices reflect information. Information-gathering is motivated by desire for highe
6、r investment returns. The marginal return on research activity may be so small that only managers of the largest portfolios will find them worth pursuing. EMH and Competition INVESTMENTS | BODIE, KANE, MARCUS Weak Semi-strong Strong Versions of the EMH INVESTMENTS | BODIE, KANE, MARCUS Technical Ana
7、lysis - using prices and volume information to predict future prices Success depends on a sluggish response of stock prices to fundamental supply-and-demand factors. Weak form efficiency Relative strength Resistance levels Types of Stock Analysis INVESTMENTS | BODIE, KANE, MARCUS Types of Stock Anal
8、ysis Fundamental Analysis - using economic and accounting information to predict stock prices Try to find firms that are better than everyone elses estimate. Try to find poorly run firms that are not as bad as the market thinks. Semi strong form efficiency and fundamental analysis INVESTMENTS | BODI
9、E, KANE, MARCUS Active Management An expensive strategy Suitable only for very large portfolios Passive Management: No attempt to outsmart the market Accept EMH Index Funds and ETFs Very low costs Active or Passive Management INVESTMENTS | BODIE, KANE, MARCUS Even if the market is efficient a role e
10、xists for portfolio management: Diversification Appropriate risk level Tax considerations Market Efficiency good schemes remain private. Lucky Event Issue Are Markets Efficient? INVESTMENTS | BODIE, KANE, MARCUS Weak-Form Tests Returns over the Short Horizon Momentum: Good or bad recent performance
11、continues over short to intermediate time horizons Returns over Long Horizons Episodes of overshooting followed by correction INVESTMENTS | BODIE, KANE, MARCUS Predictors of Broad Market Returns Fama and French Aggregate returns are higher with higher dividend ratios Campbell and Shiller Earnings yi
12、eld can predict market returns Keim and Stambaugh Bond spreads can predict market returns INVESTMENTS | BODIE, KANE, MARCUS P/E Effect Small Firm Effect (January Effect) Neglected Firm Effect and Liquidity Effects Book-to-Market Ratios Post-Earnings Announcement Price Drift Semistrong Tests: Anomali
13、es INVESTMENTS | BODIE, KANE, MARCUS Figure 11.3 Average Annual Return for 10 Size-Based Portfolios, 1926 2008 INVESTMENTS | BODIE, KANE, MARCUS Figure 11.4 Average Return as a Function of Book-To-Market Ratio, 19262008 INVESTMENTS | BODIE, KANE, MARCUS Figure 11.5 Cumulative Abnormal Returns in Res
14、ponse to Earnings Announcements INVESTMENTS | BODIE, KANE, MARCUS Strong-Form Tests: Inside Information The ability of insiders to trade profitability in their own stock has been documented in studies by Jaffe, Seyhun, Givoly, and Palmon SEC requires all insiders to register their trading activity I
15、NVESTMENTS | BODIE, KANE, MARCUS Interpreting the Anomalies The most puzzling anomalies are price- earnings, small-firm, market-to-book, momentum, and long-term reversal. Fama and French argue that these effects can be explained by risk premiums. Lakonishok, Shleifer, and Vishney argue that these ef
16、fects are evidence of inefficient markets. INVESTMENTS | BODIE, KANE, MARCUS Figure 11.6 Returns to Style Portfolio as a Predictor of GDP Growth INVESTMENTS | BODIE, KANE, MARCUS Interpreting the Evidence Anomalies or data mining? Some anomalies have disappeared. Book-to-market, size, and momentum m
17、ay be real anomalies. INVESTMENTS | BODIE, KANE, MARCUS Interpreting the Evidence Bubbles and market efficiency Prices appear to differ from intrinsic values. Rapid run up followed by crash Bubbles are difficult to predict and exploit. INVESTMENTS | BODIE, KANE, MARCUS Stock Market Analysts Some ana
18、lysts may add value, but: Difficult to separate effects of new information from changes in investor demand Findings may lead to investing strategies that are too expensive to exploit INVESTMENTS | BODIE, KANE, MARCUS Mutual Fund Performance The conventional performance benchmark today is a four-fact
19、or model, which employs: the three Fama-French factors (the return on the market index, and returns to portfolios based on size and book-to- market ratio) plus a momentum factor (a portfolio constructed based on prior-year stock return). INVESTMENTS | BODIE, KANE, MARCUS Figure 11.7 Estimates of Ind
20、ividual Mutual Fund Alphas, 1993 - 2007 INVESTMENTS | BODIE, KANE, MARCUS Consistency, the “hot hands” phenomenon Carhart weak evidence of persistency Bollen and Busse support for performance persistence over short time horizons Berk and Green skilled managers will attract new funds until the costs
21、of managing those extra funds drive alphas down to zero. Mutual Fund Performance INVESTMENTS | BODIE, KANE, MARCUS Figure 11.8 Risk-adjusted performance in ranking quarter and following quarter INVESTMENTS | BODIE, KANE, MARCUS So, Are Markets Efficient? The performance of professional managers is broadly consistent with market efficiency. Most managers do not do better than the passive strategy. There are, however, some notable superstars: Peter Lynch, Warren Buffett, John Templeton, George Soros
