Chapter 4: Market Efficiency and Behavioral Insights

In this section

• Forms of Market Efficiency (Weak, Semi-Strong, Strong)
  Forms of Market Efficiency (Weak, Semi-Strong, Strong) (CFA Level 1): Three Forms of Market Efficiency, Weak-Form Efficiency, and Semi-Strong-Form Efficiency. Key definitions, formulas, and exam tips.
• Market Anomalies and Empirical Evidence
  Market Anomalies and Empirical Evidence (CFA Level 1): Defining Market Anomalies, Types of Market Anomalies, and Calendar Anomalies. Key definitions, formulas, and exam tips.
• Behavioral Finance Biases and Their Effects on Equity Markets
  Behavioral Finance Biases and Their Effects on Equity Markets (CFA Level 1): Common Biases in Behavioral Finance, Overconfidence, and Confirmation Bias. Key definitions, formulas, and exam tips.
• Implications for Equity Valuation and Active Management
  Implications for Equity Valuation and Active Management (CFA Level 1): Valuation in an Efficient Market, Role of Behavioral Biases, and Active Management and Price Discovery. Key definitions, formulas, and exam tips.
• Overconfidence, Loss Aversion, and Other Behavioral Traps
  Overconfidence, Loss Aversion, and Other Behavioral Traps (CFA Level 1): Overconfidence, How Overconfidence Forms, and Effects on Trading Frequency. Key definitions, formulas, and exam tips.
• Impact of Digital and Social Media on Behavioral Biases
  Impact of Digital and Social Media on Behavioral Biases (CFA Level 1): Information Saturation, Echo Chambers and Confirmation Bias, and Social Influence and Herd Behavior. Key definitions, formulas, and exam tips.
• Disposition Effect and Herding Behavior
  Disposition Effect and Herding Behavior (CFA Level 1): Disposition Effect, Defining the Disposition Effect, and Key Drivers. Key definitions, formulas, and exam tips.
• The Gambler’s Fallacy and Recency Bias
  The Gambler’s Fallacy and Recency Bias (CFA Level 1): Understanding the Gambler’s Fallacy, When Mean Reversion Matters—And When It Doesn’t, and Recency Bias in Equity Markets. Key definitions, formulas, and exam tips.
• Anchoring and Confirmation Bias
  Anchoring and Confirmation Bias (CFA Level 1): Concept of Anchoring, Quick Anecdote, and Confirmation Bias. Exam-focused explanations with key terms and takeaways.