The case for market inefficiency: Investment style and market pricing

Ron Bird, Xuezhong (Tony) He (tonyxhe@gmail.com), Satish Thosar and Paul Woolley

Published Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: The level of informational efficiency of security markets has been a contentious issue among the academic and broader community over the last 35 years. This study highlights the growth in popularity in investment styles over this period, where investment decisions are made with only limited reference to available information and no concern with fair value (eg momentum investors and index investors). This paper models the market behaviour of fundamental, momentum and index investors and then simulates the behaviour of security prices in a market composed of investors following these three styles. Evidence is found to suggest that compositions of investment styles that are fairly typical of the mix of investors in current-day markets will lead to anomalous price behaviour similar to that found by other writers: an underreaction to new information which often gives rise to a subsequent overreaction.

Keywords: investment styles; market efficiency; Monte Carlo simulation (search for similar items in EconPapers)
Pages: 14 pages
Date: 2005-01-01
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Published in: Bird, R., He, X., Thosar, S. B. and Woolley, P. K., 2005, "The case for market inefficiency: Investment style and market pricing", The Journal of Asset Management, 5(6), 365-388.

Downloads: (external link)
https://link.springer.com/article/10.1057/palgrave.jam.2240154 (text/html)
Access to full text is restricted to subscribers.

Related works:
Journal Article: The case for market inefficiency: Investment style and market pricing (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uts:ppaper:2005-5

Access Statistics for this paper

More papers in Published Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney PO Box 123, Broadway, NSW 2007, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Duncan Ford (duncan.ford@uts.edu.au).