Toward a General Model of Financial Markets

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Artificial Intelligence, Learning and Computation in Economics and Finance . Understanding Complex Systems, 2023
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This paper discusses the idea of reconciling efficient market hypothesis and behavioral finance using the literature of decision theories and information sciences. The focus is centered on the precision and reliability of information and the broad definition of rationality. The main thesis advanced is that the roots of behavioral anomalies are the imprecision and reliability of information. We propose a general framework that subsumes efficient and inefficient markets as special cases. We also show that the proposed framework helps to understand behavioral anomalies.
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