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Over the past 50 years, empirical and academic evidence has shown that while the Efficient Market Hypothesis (EMH) has substantial merit, it also has significant deficiencies. In particular, the EMH assumes investors behave rationally at all times. A competing theory, Behavioral Finance (BF), generates an awareness aligned with measuring the effects of social, cognitive, and emotional factors related to investment decisions.

Markets are efficient most of the time, but because investors do not behave rationally all the time, Behavioral Finance can be used to explain the consequences of market prices, returns, and resource allocation some of the time. The awareness of these opposing theories on asset pricing has earned a Nobel Prize, but today many professional money managers still base their strategy decisions solely on the EMH . Given the evidence supporting both theories, we believe both should be the cornerstones of any investment strategy.