Efficiency, Overreaction and Underreaction in Stock Markets.A Parsimonious Model of the Three Sided-Coin

The recent financial crisis rekindled the debate on the efficient nature of stock markets. Although the Efficient Market Hypothesis remains a benchmark for the financial theory, the necessity to conjugate it with the disequilibria observed in actual financial markets draws to wonder whether the two aspects can be held into a coherent theoretical framework. We discuss a model able to keep things together in a very parsimonious way; we also provide estimates referred to stock markets consistent with the model.