Behavioral Finance Lecture 05: Fractal & Inefficient Markets

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Lecture 5: Market Behavior–Stock Markets II. (Slides: CfESI Subscribers  Part 1Part 2; Debtwatch Subscribers Part 1 Part 2)

The Frac­tal Mar­kets Hypoth­e­sis and the Inef­fi­cient Mar­kets Hypoth­e­sis are two of sev­er­al attempts to pro­vide a real­is­tic the­o­ry of how finance mar­kets actu­al­ly behave. In this first half of the lec­ture, I explain what frac­tals aew, and dis­cuss their basic char­ac­ter­is­tics.

In the sec­ond half of the lec­ture, I out­line the Frac­tal Mar­kets Hypoth­e­sis and the Inef­fi­cient Mar­kets Hypoth­e­sis (IEH). The IEH sug­gests pre­cise­ly the oppo­site invest­ment strat­e­gy to the EMH on how to max­i­mize returns on the stock mar­ket: invest in low volatil­i­ty, high Book to Mar­ket stocks.

The videos can be watched by any­one; Pow­er­point files can be down­loaded by mem­bers of the Cen­ter for Eco­nom­ic Sta­bil­i­ty

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.