This is “Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities”, chapter 7 from the book Finance, Banking, and Money (v. 1.1). For details on it (including licensing), click here.

For more information on the source of this book, or why it is available for free, please see the project's home page. You can browse or download additional books there. To download a .zip file containing this book to use offline, simply click here.

Has this book helped you? Consider passing it on:
Creative Commons supports free culture from music to education. Their licenses helped make this book available to you.
DonorsChoose.org helps people like you help teachers fund their classroom projects, from art supplies to books to calculators.

Chapter 7 Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities

Chapter Objectives

By the end of this chapter, students should be able to:

  1. Explain when expectations are rational and when they are irrational.
  2. Explain how corporate equities (stocks, shares of a corporation) are valued.
  3. Explain what is meant by the term market efficiency.
  4. Describe the ways in which financial markets are efficient.
  5. Describe the ways in which financial markets are inefficient.