Beyond the efficient markets hypothesis: towards a new paradigm

Research output: Contribution to journalArticle



To go beyond the efficient markets hypothesis (EMH) we suppose that the stock market can be in one of three states: (1) a fundamental state, where share prices are determined largely as in the EMH; (2) a bubble or bull market state, where share prices are above their fundamental levels but are expected to continue to rise further, and (3) a bear market state, where shares are held exclusively by irrational agents and rational agents cannot exploit the overvaluation because of short-selling constraints. Also, heterogeneous rational expectations may help explain some features of stock market behaviour.


Original languageEnglish
JournalBulletin of Economic Research
Early online date27 Jan 2020
Publication statusE-pub ahead of print - 27 Jan 2020


  • efficient markets hypothesis, bubbles, bear markets, heterogeneous expectations, G1

ASJC Scopus subject areas