The Efficient Market Hypothesis—A Discussion of Institutional, Agency and Behavioural Issues

The efficient market hypothesis is an elegant economic concept which has been extensively researched. The results of the research are broadly supportive of the concept for developed and competitive securities markets. Yet many, perhaps even most corporate executives and investors have serious reservations about or even reject market efficiency. Why? We argue that there are reasons to expect that, in general, people will systematically underestimate the level of efficiency in a market or of a security. We develop this position and group the discussion into market structure reasons and behavioural reasons.