Can above-average returns be earned on observing stock market overreaction?
Introduction
The efficient markets hypothesis (or EMH as it is known) and its predecessor, the random walk theory, are perhaps the most misunderstood concepts in the theory of investment. This is due partly to the back-to-front way in which the theory of efficient markets has evolved and partly to the misleading and emotive statements often ascribed to these theories, for example; 'Investment analysis is a total waste of time' and 'No one can beat the …
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