I study the topics of market efficiency and anomalies to market efficiency by focusing on finance professors in their joint roles as both researchers and market participants. I ask three main research questions: (1) how efficient do finance professors believe US stock markets are and does their opinion of market efficiency influence their investing behavior, (2) what really matters to finance professors when they buy and sell stocks, and (3) why do finance professors publish market anomalies? Related to the first question, I discover that finance professors agree that US stock markets are weak form efficient but not strong form efficient. However, there is much disagreement about the semi-strong form efficiency of US stock markets. Their investing behavior, though, suggests that finance professors accept markets as semi-strong form efficient; twice as many finance professors passively invest than actively invest. Surprisingly, their opinion about market efficiency has very little to do with their investing behavior. Instead, their investing behavior seems primarily driven by their confidence in their own abilities to beat the market, regardless of how efficient they perceive US stock markets to be. Related to the second question, I present three main findings. First, traditional valuation techniques and asset-pricing models commonly used in research and taught in the classroom are universally unimportant to finance professors when they buy and sell stocks. Second, the most important information to finance professors when considering stock purchases and sales are firm characteristics (PE ratio and market capitalization) and momentum related information (the stock's return over the past six to 12 months and 52-week high and low). Third, finance professors have less real-world investing experience than one might expect – the median professor has bought an individual stock between 10 and 19 times, and 14.5% have never done so. Related to the third question, I find that finance professors are, in fact, acting rationally when they publish market anomalies. The theory I develop suggests it is rational for researchers to publish market anomalies if they have relatively few previous publications or have lesser reputations. Accordingly, the theory implies that the likelihood of publishing an anomaly and the profitability of published anomalies should be inversely related to the authors' previous publications and reputation. These implications are empirically corroborated providing evidence for the theory and supporting the notion that researchers are behaving rationally when they publish. Sadly, this also suggests that it is very likely that profitable anomalies have been discovered but not published so that the discoverer can exploit the anomaly, which provides indirect evidence of market inefficiency. / A Dissertation submitted to the Department of Finance in partial fulfillment of the
requirements for the degree of Doctor of Philosophy. / Degree Awarded: Summer Semester, 2007. / Date of Defense: May 22, 2007. / Investing, Market Anomalies, Market Efficiency, Investor Behavior, Overconfidence, P/E Ratio / Includes bibliographical references. / David Peterson, Professor Directing Dissertation; Michael Brady, Outside Committee Member; Gary Benesh, Committee Member; James Doran, Committee Member.
| Identifer | oai:union.ndltd.org:fsu.edu/oai:fsu.digital.flvc.org:fsu_168918 |
| Contributors | Wright, Colbrin (Colby) A. (authoraut), Peterson, David (professor directing dissertation), Brady, Michael (outside committee member), Benesh, Gary (committee member), Doran, James (committee member), Department of Finance (degree granting department), Florida State University (degree granting institution) |
| Publisher | Florida State University |
| Source Sets | Florida State University |
| Language | English, English |
| Detected Language | English |
| Type | Text, text |
| Format | 1 online resource, computer, application/pdf |
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