Behavioral Finance Lecture 05: Fractal & Inefficient Markets
Lecture 5: Market Behavior–Stock Markets II. (Slides: CfESI Subscribers Part 1; Part 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