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How Rational Investors Deal With Uncertainty (Or, Reports Of The Death Of Efficient Markets Theory Are Greatly Exaggerated)

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  • Keith C. Brown
  • W. V. Harlow
  • Seba M. Tinic

Abstract

Much academic research in finance in the past quarter century has been devoted to examining the proposition that corporate securities are priced by “rational” investors in an “efficient market.” Stated most simply, the proposition says that the intensive pursuit of large returns by stock market investors ensures that, for the vast majority, only modest ones will be had. This argument, which has been refined and tested as the “efficient markets hypothesis” (EMH), could well be described as the foundation of modern financial theory.

Suggested Citation

  • Keith C. Brown & W. V. Harlow & Seba M. Tinic, 1989. "How Rational Investors Deal With Uncertainty (Or, Reports Of The Death Of Efficient Markets Theory Are Greatly Exaggerated)," Journal of Applied Corporate Finance, Morgan Stanley, vol. 2(3), pages 45-58, September.
    • Handle: RePEc:bla:jacrfn:v:2:y:1989:i:3:p:45-58
    DOI: 10.1111/j.1745-6622.1989.tb00349.x
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    Cited by:

    1. Yochanan Shachmurove, 2001. "Tests of Financial Markets Efficiency for Thirteen Small European Countries," Penn CARESS Working Papers eda175263851a1d10f52acc29, Penn Economics Department.

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