Courts, administrative policy makers and legal scholars have widely embraced the theory that well-developed markets are efficient. In this Article, Professors Gordon and Kornhauser cast doubt on the wisdom of reliance on the efficient market hypothesis as applied to various areas of corporate law. Their charge is that legal decision makers and scholars have misunderstood the assumptions and limitations of the theory and have neglected recent critical economics scholarship. Professors Gordon and Kornhauser begin by detailing the assertions of the hypothesis in relation to the workings of securities markets, focusing on various asset pricing models used to test the hypothesis They then examine critically the interrelation between the hypothesis and the processes by which information is acquired and reflected in market price Finally, they explore the legal policy implications of the problems they have exposed: markets are not as "efficient" as once thought, and we may not be able accurately to test the efficiency of a given market.
Law | Law and Economics | Securities Law
Jeffrey N. Gordon & Lewis A. Kornhauser,
Efficient Markets, Costly Information, and Securities Research,
N.Y.U. L. Rev.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/3139