Implications of Capital Markets Research for Corporate Finance

N We focus our discussion on the same two areas of capital markets research as does Professor Haugen: the efficient markets hypothesis and asset pricing theory. Our purpose is not to survey the extensive literature that has evolved but to examine the implications of this analysis for the practice of corporate finance. Thus, we focus on how an appreciation of the contributions to capital markets research over the past three decades can help managers make better business decisions. While we disagree with several of Professor Haugen's conclusions, we will not comment on every study or piece of evidence discussed. Rather, we focus mainly on the big picture of the research process and the potential dangers of overinterpreting historical data.