A REVIEW ON THE RELATIONSHIPS AMONG ADAPTIVE MARKETS HYPOTHESIS, THE EFFICIENT MARKETS HYPOTHESIS AND BEHAVIOURAL FINANCE

Abstract

The Efficient Markets Hypothesis (EMH), which has had a significant impact on the field of finance since its development, has triggered many subsequent researches and some of the researches have brought a critical view to the Hypothesis. Two important alternatives have been put forward to overcome the criticisms and observed deficiencies of the EMH: Behavioural Finance and Adaptive Markets Hypothesis. Although various studies have been conducted to examine the relationship between these two approaches and the EMH, not much research has been conducted to examine their relationship with each other. In this study, the relationship between the Behavioural Finance approach and the Adaptive Markets Hypothesis, their similarities and differences are examined and it is aimed to complete this perspective that is felt to be lacking in the literature. The current study aims to cross-examine the hypotheses (EMH- Behavioural Finance, EMH- AMH), which are related to each other and try to answer the deficiencies seen separately, and in this way, it reveals that theories that are alternative to each other can also complement each other at various points and thus, when evaluated together, more effective evaluations can be made in the field of finance.

Keywords

• adaptive markets
• efficient markets
• behavioural finance