Inefficient Markets – Andrei Shleifer

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[amazonsearch]Inefficient Markets[/amazonsearch]

 

The cracks of the efficient market hypothesis, from within the economics profession, from one of its top guys. A rigorous book to throw to brainwashed MBAs.

 

Heavy on math but balanced with real world evidence. Just the closed-end funds chapter is worth the, it must be said, very expensive price for such a short book.

 

– Noise Trading, a theory of dumb money and how it can survive.

– The Limits of Arbitrage, or how the lack of perfect instruments and risk aversion is a detriment to closing the noise.

– The Limits of Professional Arbitrage, and how redemptions make life even more difficult.

– Positive Feedback, how noise traders can extend a trend longer than you think.

 

And it doesn't even discuss financial crises.

 

The shorter version: http://www.economics.harvard.edu/faculty/shleifer/files/noise_trader_approach_finance.pdf