Market Efficiency, Long-Term Returns, and Behavioral Finance

Market eƒciency survives the challenge from the literature on long-term return anomalies. Consistent with the market eƒciency hypothesis that the anomalies are chance results, apparent overreaction to information is about as common as underreac- tion, and post-event continuation of pre-event abnormal returns is about as frequent as post-event reversal. Most important, consistent with the market eƒciency prediction that apparent anomalies can be due to methodology, most long-term return anomalies tend to disappear with reasonable changes in technique. ( 1998 Elsevier Science S.A. All rights reserved.