This paper revisits market efficiency and argues that evidence cannot cleanly separate inefficient pricing from flawed asset pricing models. It surveys return predictability, event studies, and private information, noting that predictable variation may explain up to 40% of returns over longer horizons.
Efficient Capital Markets: II
Eugene Fama
Research
43 Pages
Key Takeaways
Return Predictability: Predictable variation explains less than 3% of monthly return variance but roughly 25% for returns over 2 to 4 years.
January Effect: From 1941 to 1981, the smallest CRSP quintile averaged 8.06% each January versus 1.34% for the S&P 500.
Market Concentration: In 1990, the smallest quintile represented 51.2% of stocks but 1.5% of value, while the largest quintile held 77.2%.
Join our newsletter to have all of this content + Exclusive Newsletter Bonus Content delivered to your inbox every week
