Efficiency Overpowers Efforts to Chase Losses
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2 word format
document in English
finance
school essay
published 04/09/2007
review : Completed
level : Advanced
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SummaryThe aim of this paper is to discuss Dr. Ryan Garvey’s studies “Do Losses Linger? Evidence from proprietary stock trading,” while examining how this works inline with the Efficient Market Hypothesis. Through the research provided by Dr Garvey, it is expressed that professional traders are likely to take more risk to make up for their losses throughout a given day. Efficient markets provide proof that investors are not going to outperform their losses and breakeven for that day. This paper is written under the assumptions of the Efficient Market Hypothesis.
Table of Contents
- Firstly there is importance placed on the disposition effect.
- It is important for an investor to focus on the current value of their investment; the past performance does not dictate the future performance
- In a given afternoon, if the trader were to maintain their strategy from the morning, they would have the same potential for gains and loses
- Another theory that might effect the decisions of an investor is regret aversion.
- In understanding all of the potential problems involved with trying to chase losses, a solution must be sought after
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