{"product_id":"why-are-theoretically-perfect-and-efficient-capital-markets-so-imperfect-and-volatile-in-practice-von-michael-marquardt","title":"Why are theoretically perfect and efficient capital markets so imperfect and volatile in practice?","description":"\u003cp\u003eResearch Paper (undergraduate) from the year 2010 in the subject Business economics - General, grade: 1,3, University of Applied Sciences Northwestern Switzerland, language: English, abstract: The Efficient market hypothesis can be considered as part of rational economics but it does not specify at all how individuals should or will act. \u003c\/p\u003e\u003cp\u003eTherefore it might be a useful model of the functioning of the market as a whole but it does not explain the behaviors of investors as well as managers and other participants.\u003c\/p\u003e\u003cp\u003eWhile the Efficient market hypothesis deals as a basis for understanding the normal working of the markets, from time to time it might happen that the market\u003c\/p\u003e\u003cp\u003eas a whole or an individual stock may act irrationally. \u003c\/p\u003e\u003cp\u003eSuch behavior is well known and generally occurs when the market price of a share turns away from its intrinsic\u003c\/p\u003e\u003cp\u003evalue. The result is what commonly is called a bubble. \u003c\/p\u003e\u003cp\u003eThis term is often used but the reasons for the occurrence are quite unclear. In fact, at the same time as the\u003c\/p\u003e\u003cp\u003emarket as a whole has become more efficient, instances of irrationality have become more common or at least appear to be.\u003c\/p\u003e\u003cp\u003eTherefore we try to discuss the question why capital markets, which are considered as efficient and perfect in theory, are volatile and imperfect in reality.\u003c\/p\u003e\u003cp\u003e\u003c\/p\u003e\u003cp\u003eThe paper responds to this question by discussing mainly the irrational behavior of people by turning into the field of psychology. \u003c\/p\u003e\u003cp\u003e\u003c\/p\u003e\u003cp\u003eFurthermore it seeks for approaches of explanation conducted by different investment strategies containing among others an increased use of derivative instruments or single trades based on massive capacity which therefore influence prices.\u003c\/p\u003e\u003cp\u003e\u003c\/p\u003e\u003cp\u003eMethodology and Structure of the paper\u003c\/p\u003e\u003cp\u003eIn general the paper can be divided in 3 parts, a theoretical as well as an analytical one and a final point the Conclusion (Part C) which sums up the basic findings of\u003c\/p\u003e\u003cp\u003ethe paper. \u003c\/p\u003e\u003cp\u003eWhereas Part A can be regarded as delivering the theoretical\u003c\/p\u003e\u003cp\u003ebackground, Part B contains the empirical analysis based on several case studies.\u003c\/p\u003e\u003cp\u003eChapter 1, 2 and 3 are providing the reader with the needed knowledge of the capital market, volatility and the efficient market hypothesis in order to assure the\u003c\/p\u003e\u003cp\u003eunderstanding of the more complex prosecution of the paper\u003c\/p\u003e\u003cp\u003e\u003c\/p\u003e\u003cp\u003eAfter discussing those fundamentals the paper soon takes a view on some instances of irrationality in Part B, but first of all delivers in Chapter 4, 5 and 6 some theories that attempt to explain such irrationalities.\u003c\/p\u003e\u003cp\u003eFinally the paper is finished by linking those theories with the observed instances of irrationality\u003c\/p\u003e\u003cdiv class=\"aw-variant-hidden-subtitle-div\" id=\"aw-variant-subtitle-9783640565375\"\u003e\u003ch3\u003e\u003c\/h3\u003e\u003c\/div\u003e","brand":"Libri","offers":[{"title":"Softcover - 9783640565375","offer_id":39441738170461,"sku":"9783640565375","price":42.95,"currency_code":"EUR","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0940\/0622\/files\/48380550-ac38-4aa9-8296-953fed42ae44.jpg?v=1777696029","url":"https:\/\/shop.autorenwelt.de\/products\/why-are-theoretically-perfect-and-efficient-capital-markets-so-imperfect-and-volatile-in-practice-von-michael-marquardt","provider":"Autorenwelt Shop","version":"1.0","type":"link"}