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Market Anomalies 1. Why does market efficiency matter? Why is having correctly priced securities so important? 2. Identify and describe 2 different market anomalies that

Market Anomalies

1. Why does market efficiency matter? Why is having "correctly" priced securities so important?

2. Identify and describe 2 different market anomalies that are not covered in chapter 4 or the PowerPoints associated with this chapter (ie lagged reaction to earnings, value vs growth, etc). What makes them anomalies? Why do these anomalies present a challenge to supporters of the Efficient Market Hypothesis (i.e. Rational/Traditional Finance)?

3. What do De Bondt and Thaler (1985) investigate and identify as potential explanations for the momentum and reversal anomalies? And how do their explanations differ from those of the supporters of the Efficient Market Hypothesis?

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