Module 3 · Equity

Market Efficiency

EN: EMH forms, market anomalies, behavioral finance basics.
VN: Các dạng EMH, bất thường thị trường, tài chính hành vi.

1. Three Forms of EMH Core

Information sets

Weak Prices reflect all past trading data → technical analysis useless.
Semi-strong Prices reflect all public info (incl. financials, news) → fundamental analysis useless on average.
Strong Prices reflect all info (incl. private/insider) → no investor can systematically outperform.

2. Common Anomalies Concept

Calendar January effect, day-of-week, turn-of-month.
Cross-section Size, value, momentum, low-vol effects.
Event Earnings drift, M&A returns.

3. Behavioral Biases Concept

Loss aversion Pain of loss > pleasure of equivalent gain.
Overconfidence Overestimate own ability/info.
Anchoring Stuck on initial reference point.
Herding Follow the crowd.
Disposition Sell winners too early, hold losers.

Practice problem Practice

Practice problem

Technical analysts using past price patterns to predict future prices consistently fail to generate excess returns. Which form of EMH is most consistent with this finding?

Show solution

Weak-form EMH: prices reflect all past trading data.

Past prices have no predictive power → technical analysis useless.

Weak-form EMH (at minimum)