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Editorial Statement and Research Ideas for Efficiency and Anomalies in Stock Markets
Open AccessFeature PaperReview

Review on Efficiency and Anomalies in Stock Markets

by 1, 2, 3,4,5,6,7 and 8,9,10,*
1
Department of Economics and Finance, Hong Kong Shue Yan University, Hong Kong 999077, China
2
Department of International Finance, Guangzhou College of Commerce, Guangzhou 511363, China
3
Department of Finance, Asia University, Taichung 41354, Taiwan
4
Discipline of Business Analytics, University of Sydney Business School, Sydney, NSW 2006, Australia
5
Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam, 3062 Rotterdam, The Netherlands
6
Department of Economic Analysis and ICAE, Complutense University of Madrid, 28040 Madrid, Spain
7
Institute of Advanced Sciences, Yokohama National University, Yokohama 240-8501, Japan
8
Department of Finance, Fintech Center, and Big Data Research Center, Asia University, Taichung 41354, Taiwan
9
Department of Medical Research, China Medical University Hospital, Taichung 40447, Taiwan
10
Department of Economics and Finance, Hang Seng University of Hong Kong, Hong Kong 999077, China
*
Author to whom correspondence should be addressed.
Economies 2020, 8(1), 20; https://doi.org/10.3390/economies8010020
Received: 22 December 2019 / Revised: 26 February 2020 / Accepted: 4 March 2020 / Published: 12 March 2020
(This article belongs to the Special Issue Efficiency and Anomalies in Stock Markets)
The efficient-market hypothesis (EMH) is one of the most important economic and financial hypotheses that have been tested over the past century. Due to many abnormal phenomena and conflicting evidence, otherwise known as anomalies against EMH, some academics have questioned whether EMH is valid, and pointed out that the financial literature has substantial evidence of anomalies, so that many theories have been developed to explain some anomalies. To address the issue, this paper reviews the theory and literature on market efficiency and market anomalies. We give a brief review on market efficiency and clearly define the concept of market efficiency and the EMH. We discuss some efforts that challenge the EMH. We review different market anomalies and different theories of Behavioral Finance that could be used to explain such market anomalies. This review is useful to academics for developing cutting-edge treatments of financial theory that EMH, anomalies, and Behavioral Finance underlie. The review is also beneficial to investors for making choices of investment products and strategies that suit their risk preferences and behavioral traits predicted from behavioral models. Finally, when EMH, anomalies and Behavioral Finance are used to explain the impacts of investor behavior on stock price movements, it is invaluable to policy makers, when reviewing their policies, to avoid excessive fluctuations in stock markets. View Full-Text
Keywords: market efficiency; EMH; anomalies; Behavioral Finance; Winner–Loser Effect; Momentum Effect; calendar anomalies; BM effect; the size effect; Disposition Effect; Equity Premium Puzzle; herd effect; ostrich effect; bubbles; trading rules; technical analysis; overconfidence; utility; portfolio selection; portfolio optimization; stochastic dominance; risk measures; performance measures; indifference curves; two-moment decision models; dynamic models; diversification; behavioral models; unit root; cointegration; causality; nonlinearity; covariance; copulas; robust estimation; anchoring market efficiency; EMH; anomalies; Behavioral Finance; Winner–Loser Effect; Momentum Effect; calendar anomalies; BM effect; the size effect; Disposition Effect; Equity Premium Puzzle; herd effect; ostrich effect; bubbles; trading rules; technical analysis; overconfidence; utility; portfolio selection; portfolio optimization; stochastic dominance; risk measures; performance measures; indifference curves; two-moment decision models; dynamic models; diversification; behavioral models; unit root; cointegration; causality; nonlinearity; covariance; copulas; robust estimation; anchoring
MDPI and ACS Style

Woo, K.-Y.; Mai, C.; McAleer, M.; Wong, W.-K. Review on Efficiency and Anomalies in Stock Markets. Economies 2020, 8, 20.

AMA Style

Woo K-Y, Mai C, McAleer M, Wong W-K. Review on Efficiency and Anomalies in Stock Markets. Economies. 2020; 8(1):20.

Chicago/Turabian Style

Woo, Kai-Yin; Mai, Chulin; McAleer, Michael; Wong, Wing-Keung. 2020. "Review on Efficiency and Anomalies in Stock Markets" Economies 8, no. 1: 20.

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Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

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