Financial Mathematics
Asset pricing anomalies are deviations from the expected return predictions of traditional asset pricing models, indicating that actual asset prices do not always align with their fundamental values. These anomalies challenge the Efficient Market Hypothesis, suggesting that markets may not be fully efficient and can be influenced by investor behavior, market frictions, or irrational decision-making. They highlight the potential for excess returns and mispricing in financial markets, which can have significant implications for asset pricing frameworks like the Consumption Capital Asset Pricing Model.
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