Falling home and financial asset prices have combined to weaken the average household’s balance sheet, and this has helped to slow down the current recovery. We examine the role that household balance sheets have typically played in postwar business cycles and assess their importance in explaining why some recoveries, including the current one, have been weaker than others.
Efficient Market Hypothesis (EMH) is a cornerstone in modern finance theory. Efficient market hypothesis states that it is impossible to make abnormal returns in financial markets because financial asset prices always reflect all available information. This chapter was undertaken in order to give a brief survey of modern finance theory by mainly focusing on the efficient market hypothesis. The authors also discuss the empirical foundations of the efficient market hypothesis. Finally, the main challenges to the efficient market hypothesis are introduced in order to point out a perspective for future research.
Does Investor Risk Perception Drive Asset Prices in Markets? Experimental Evidence
