Toward a General Model of Financial Markets

Nihad Aliyev*, Xue Zhong He

*Corresponding author for this work

Research output: Chapter in Book or Report/Conference proceedingChapterpeer-review

Abstract

This paper discusses the idea of reconciling efficient market hypothesis and behavioral finance using the literature of decision theories and information sciences. The focus is centered on the precision and reliability of information and the broad definition of rationality. The main thesis advanced is that the roots of behavioral anomalies are the imprecision and reliability of information. We propose a general framework that subsumes efficient and inefficient markets as special cases. We also show that the proposed framework helps to understand behavioral anomalies.

Original languageEnglish
Title of host publicationUnderstanding Complex Systems
PublisherSpringer Science and Business Media Deutschland GmbH
Pages71-100
Number of pages30
DOIs
Publication statusPublished - 16 Feb 2023

Publication series

NameUnderstanding Complex Systems
ISSN (Print)1860-0832
ISSN (Electronic)1860-0840

Keywords

  • Behavioral finance
  • Decision theory
  • Efficient markets
  • Information uncertainty

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