A. What is the alternative? Is there a better theory? Will it produce more consistent predictions than CAPM (and efficient markets)?

B. How does time play a role here? Do markets need to be efficient every single moment of each day for the model to be valid? If there is a prolonged period of "irrational exuberance" and prices are pushed "too high", then the bubble bursts and it goes back to the value predicted by efficient markets (CAPM) after a year or two, is the model valid or not?

C. In terms of alternatives, what types of behavior may lead to systematic mispricing of assets? For example, herd behavior is a possibility - what does this mean? Can you give some examples of other behavioral activities that might lead to a rejection of the efficient markets hypothesis?

D. Do different types of investors play a role in the outcome here? How might short-run investors be different than long-run investors and how might they impact the market?

E. Is there any element to investing which is not really investment behavior? Could some participants view this as a form of consumption (enjoying the activity of trading)? Could this impact our theory?

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A Behavioral psychology approaches to stock market trading are among some of the more promising alternatives to EMH investment strategies such as momentum trading seek to exploit exactly such ineffici... View the full answer