Long Term Asset Price Volatility This study investigates long-term asset

An absence of crucial information that is accessible to investors creates a situation in which rational decision making by investors leads to otherwise unexplainable outcomes (supports the efficient market hypothesis).

Irrational decision-making behaviors on the part of investors lead to long-term volatility in asset pricing and the resulting market reversals (does not support the efficient market hypothesis).

Econometric data analysis procedures were applied in the tests of the hypotheses. The primary procedure applied was the Augmented Dickey-Fuller Test (ADF 2) of stationarity / non-stationarity. The statistical application used in the analyses was EazyReg International.

The findings of Case Study One (Japan) and Case Study Two (United States) likely are more reliable than the findings of Case Study Three (Saudi Arabia) because the stock market asset bubble in Saudi Arabia is still in progress. When this study was initiated, the expectation was that the stock market bubble in Saudi Arabia would quickly end because of the dramatic increase in stock prices. That expectation did not occur.

The findings of both Case Study One and Case Study Two failed to provide support for the efficient market hypothesis as a model within which to explain s

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quence. In contrast, a finding that the tested data is characterized by stationarity will support the effectiveness of the efficient market hypothesis in explaining equity stock prices during a bubble sequence. With respect to Hypothesis 2, the expectation in relation to the alternative hypothesis was that the relationship between stock prices and interest rates in bubble sequence periods will be found to be non-stationary in character, while the relationship will be found to be stationary during non-bubble sequence periods. The expected findings would provide support for a behavioral finance explanation of stock market prices during bubble sequences. Findings other than those expected in relation to the alternative hypothesis would reject a behavioral finance explanation of stock market prices during bubble sequences. CHAPTER 2 Review of Literature Introduction to the Literature Review The purpose of this study was to assess the comparative explanatory validity of the efficient market hypothesis and behavioral finance theory in explaining market activity characterized by volatile price rises, reversal, and recovery. The study compared the capacity of the alternative explanations in relation to three bubble-crash-recove
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Approximate Word count = 9354
Approximate Pages = 37 (250 words per page)

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