CFA L1 / Equity / M3. Market Efficiency
Module 3 · Equity

Market Efficiency

EN: EMH forms, market anomalies, behavioral finance basics.
VN: Các dạng EMH, bất thường thị trường, tài chính hành vi.

1. Three Forms of EMH Core

About: Weak (past prices) → no value in technical analysis. Semi-strong (all public) → no value in fundamental analysis on average. Strong (all info incl. private) → not even insiders profit.Tóm tắt: Weak (giá), semi-strong (thông tin công khai), strong (cả nội bộ). Không thể beat market.

Information sets

  • Weak Prices reflect all past trading data → technical analysis useless.
  • Semi-strong Prices reflect all public info (incl. financials, news) → fundamental analysis useless on average.
  • Strong Prices reflect all info (incl. private/insider) → no investor can systematically outperform.

2. Common Anomalies Concept

About: Calendar (January), cross-section (size, value, momentum, low-vol), event (earnings drift, M&A). Existence challenges strict EMH but persistence varies.Tóm tắt: Calendar, cross-section, event. Thách thức EMH nhưng tồn tại không bền.
  • Calendar January effect, day-of-week, turn-of-month.
  • Cross-section Size, value, momentum, low-vol effects.
  • Event Earnings drift, M&A returns.

3. Behavioral Biases Concept

About: Loss aversion (loss > equivalent gain), overconfidence, anchoring, herding, disposition (sell winners hold losers). Behavioral finance challenges rational-investor assumption.Tóm tắt: Loss aversion, overconfidence, anchoring, herding, disposition. Phản bác giả định nhà đầu tư duy lý.
  • Loss aversion Pain of loss > pleasure of equivalent gain.
  • Overconfidence Overestimate own ability/info.
  • Anchoring Stuck on initial reference point.
  • Herding Follow the crowd.
  • Disposition Sell winners too early, hold losers.

Practice problem Practice

Practice problem

Technical analysts using past price patterns to predict future prices consistently fail to generate excess returns. Which form of EMH is most consistent with this finding?

Show solution
Weak-form EMH: prices reflect all past trading data.
Past prices have no predictive power → technical analysis useless.
Weak-form EMH (at minimum)