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Stock Market Bubbles? A Reply

Published online by Cambridge University Press:  03 March 2009

Eugene N. White
Eugene N. White
Affiliation:
Professor of Economics at Rutgers University, New Brunswick, NJ 08903, and a Research Associate of the NBER.
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Extract

Research in finance is guided by powerful intuitions from models of efficient markets. However, researchers have uncovered a number of puzzles that are not explained by these models. Such anomalies include the excess volatility of stock prices, the closed-end mutual fund paradox, and the mean reversion in stock prices that produces predictable returns for long holding periods.1 Whereas financial economists all recognize the existence of these puzzles, they disagree about how they can be explained. Robert J. Shiller argues, for example, that efficient-markets models cannot hope to explain these anomalies and looks to alternatives that incorporate fads.2 In contrast, John H. Cochrane believes that the puzzles can be explained by improved models of fundamentals.3

Type
Notes and Discussions
Information
The Journal of Economic History , Volume 55 , Issue 3 , September 1995 , pp. 655 - 665
Copyright
Copyright © The Economic History Association 1995

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References

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