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CHAPTER 6 - Coggle Diagram
CHAPTER 6
EFFICIENT MARKET
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BEHAVIORAL FINANCE
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Behavioral finance theorist identifies market anomalies, which impact security's return, as a counter to the asset-pricing model, which measures risk and return.
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In a market where securities accurately reflect all possible information, they are a crucial component.
TECHNICAL ANALYSIS
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IMPLICATION
FUNDAMENTAL ANALYSIS
In an efficient market, prices rapidly react to new information, making security analysis ineffective for investors. Extreme competition often leads to lower security prices.
TECHNICAL ANALYSIS
Price fluctuations are random, affecting trading profits. In an efficient market, supply and demand shift rapidly, while technical indicators measure after-the-fact events.
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RANDON WALK HYPOTESIS
The theory suggests that stock price movements are unpredictable, meaning there's no way to predict their direction. Studies show they don't follow neat patterns, suggesting efficient markets respond quickly to changes.