ABSTRACT
The occurrence of stock market bubbles and crashes is often cited as evidence against the efficient market hypothesis. It is argued that new information is rarely, if ever, capable of explaining the sudden and dramatic share price movements observed during bubbles and crashes. Samuelson (1998) distinguished between micro efficiency and macro efficiency. Samuelson took the view that major stock markets are micro efficient in the sense that stocks are (nearly) correctly priced relative to each other, whereas the stock markets are macro inefficient. Macro inefficiency means that prices, at the aggregate level, can deviate from fair values over time. Jung and Shiller (2002) concurred with Samuelson’s view and suggested that waves of over-and undervaluation occur for the aggregate market over time. Stock markets are seen as having some predictability in the aggregate and over the long run.
