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Asset Pricing and Intrinsic Values: A Review Essay

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  • Bruce N. Lehmann
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    Abstract

    The efficient markets hypothesis has dominated modern research on asset prices. Asset prices and their intrinsic values differ in inefficient financial markets but difficulties in the measurement of intrinsic value greatly complicate market efficiency tests. Reflections on the measurement of intrinsic value provide insight into the interpretation of existing evidence and suggestions for generating new evidence on market efficiency. This review essay on the state of knowledge about market efficiency focuses on "A Reappraisal of the Efficiency of Financial Markets", analyzing the research areas from this perspective: (1) short-run stock return predictability; (2) asset pricing anomalies; and (3) excess volatility and present value relations.

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    File URL: http://www.nber.org/papers/w3873.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3873.

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    Date of creation: Oct 1991
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    Publication status: published as Lehmann, Bruce N., 1991. "Asset pricing and intrinsic values : A review essay," Journal of Monetary Economics, Elsevier, vol. 28(3), pages 485-500, December.
    Handle: RePEc:nbr:nberwo:3873

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    1. Cochrane, John H., 1991. "Volatility tests and efficient markets : A review essay," Journal of Monetary Economics, Elsevier, vol. 27(3), pages 463-485, June.
    2. Ross, Stephen A, 1978. "A Simple Approach to the Valuation of Risky Streams," The Journal of Business, University of Chicago Press, vol. 51(3), pages 453-75, July.
    3. Mark Rubinstein, 1976. "The Valuation of Uncertain Income Streams and the Pricing of Options," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 407-425, Autumn.
    4. Bruce N. Lehmann, 1990. "Fads, Martingales, and Market Efficiency," NBER Working Papers 2533, National Bureau of Economic Research, Inc.
    5. Hansen, Lars Peter & Jagannathan, Ravi, 1991. "Implications of Security Market Data for Models of Dynamic Economies," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 225-62, April.
    6. Lehmann, Bruce N, 1990. "Fads, Martingales, and Market Efficiency," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 1-28, February.
    7. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
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    Cited by:
    1. Robert J. Shiller, 1998. "Human Behavior and the Efficiency of the Financial System," Cowles Foundation Discussion Papers 1172, Cowles Foundation for Research in Economics, Yale University.
    2. repec:dgr:uvatin:2003103 is not listed on IDEAS
    3. Cees Diks & Roy van der Weide, 2003. "Herding, A-synchronous Updating and Heterogeneity in Memory in a CBS," Tinbergen Institute Discussion Papers 03-103/1, Tinbergen Institute.
    4. Abbigail Chiodo & Massimo Guidolin & Michael T. Owyang & Makoto Shimoji, 2003. "Subjective probabilities: psychological evidence and economic applications," Working Papers 2003-009, Federal Reserve Bank of St. Louis.

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