Krannert Graduate School of Management

Raghavendra Rau 
Associate Professor

Market Efficiency and Corporate Finance

Who am I? Well, an academic is usually defined by his (her) research focus. So my basic research focus is empirical corporate finance and the economics of information. In information economics, my focus is on the acquisition and utilization of information by participants in a market framework - I am interested in checking whether markets are efficient in incorporating information into prices. Why is this important? Market efficiency means that it is impossible to make money on the stock market - a rather dismal view of life. If markets are not efficient, it may be possible to make money on the stock markets.

So how do we check that markets are efficient or not? One way is to turn to the area of empirical corporate finance, looking at event studies in particular. I investigate the market reaction to corporate events such as mergers, acquisitions, divestitures and so on, both in the short and long run. This relates to the speed of incorporation of information into prices by the market as a whole. I believe that markets are not efficient in the short-run.

Whether they are efficient in the long run is a subject of considerable debate in the profession today. I argue that in many cases, markets are not necessarily efficient in the long run either. My thesis for example, investigated a specific form of this inefficiency in the performance of acquiring firms in mergers and acquisitions.

Note: For beginning PhD students, market efficiency is both an extremely interesting and extremely controversial area to carry out research.

So how does my research tie into this? The links to the side describe some of my papers and include links to download them.

In addition, if you really want to, you can download a copy of my resume (HTML Version) (PDF Version)

Other interests:

• Aikido (click here to connect to an aikido server).
• Movies (click here to connect to the Internet Movie Database).
• Science Fiction (click here to connect to the MIT Science Fiction Library and here to search it directly.)

Other Places to Visit:

• I lived in France for several years, so here are some French related sites:
  • If you would like to visit the Louvre, click here .
  • If you'd like to explore Paris, go ahead, click here .
• I maintain the TIMER site for Finance. This is a very comprehensive set of links to other finance related sites on the web. One advantage of this site is that you can add your own links.
• If you'd like to explore other business schools, the Marr and Kirkwood Official Guide to the Business School Webs rates different business schools on the basis of their home pages.

Search Tools:

The Google search tool below has been customized to hunt mostly in education, social sciences, financial services and management, so that results you get are more relevant to potential readers of this site.

• Alternatively, if you don't know where you would like to go next, the Yahoo server has an excellent directory.
• You could try a meta-engine such as DogPile  
• You can also Ask Jeeves

Comments or Problems

If you would like a copy of any of the working papers listed above, please send me an e-mail at , phone me at 1 (765) 494 4488 or fax me at 1 (765) 494 9658. Comments, complaints and suggestions are also welcome.

This page, and all contents, are Copyright © 2008 by Raghavendra Rau, Krannert School, Purdue University
Last Updated: 19 March 2008.