A Random Walk through Asset Pricing Anomalies

The idea of efficient markets is remarkably simple: All current information is reflected in and all new information is rapidly included into the price, keeping the prices unpredictable. Investors behave rationally and make financial decisions according to their marginal utility. However, Behavioral Finance argues that this is not always the case and that investors are susceptible to many irrationalities, evident in biases and heuristics used. The objective of this thesis is twofold: The first objective is to provide an overview of the Efficient Markets Hypothesis along with its shortcomings, while considering the alternative approach of Behavioral Finance at the same time. The second goal is to inspect one specific shortcoming in the nine developing markets of Eastern Europe.