Freshwater, Saltwater, and Deepwater: Efficient Market Hypothesis versus Behavioral Finance
Oxford University School of Geography and the Environment Working Paper No. 12-03
25 Pages Posted: 21 Feb 2012
Date Written: February 21, 2012
The efficient market hypothesis (EMH) and behavioral finance (BF) form the blame-hope axis of the ongoing soul-searching exercise in economics, which frequently refers to the ‘Chicago School’ and the ideological division between ‘freshwater’ and ‘saltwater’ universities. Citation analysis for 1965-2010 shows that these simple geographical anecdotes do not apply, as saltwater economists heavily cited the seminal EMH papers from the beginning, and vice versa. BF lags behind EMH in terms of the quantity, dynamics, scope, and international reach of citations. BF is far from stealing a march on the EMH, and the latter is still used as the benchmark.
Keywords: efficient market hypothesis, behavioral finance, Chicago School, Eugene Fama
JEL Classification: A14, B26, G02, G14
Suggested Citation: Suggested Citation