Research paper from the year 2010 in the subject Business economics - General, grade: 1,3, University of Applied Sciences Northwestern Switzerland, language: English, abstract: The Efficient market hypothesis can be considered as part of rational economics but it does not specify at all how individuals should or will act. Therefore it might be a useful model of the functioning of the market as a whole but it does not explain the behaviors of investors as well as managers and other participants.While the Efficient market hypothesis deals as a basis for understanding the normal working of the markets, from time to time it might happen that the marketas a whole or an individual stock may act irrationally. Such behavior is well known and generally occurs when the market price of a share turns away from its intrinsicvalue. The result is what commonly is called a bubble. This term is often used but the reasons for the occurrence are quite unclear. In fact, at the same time as themarket as a whole has become more efficient, instances of irrationality have become more common or at least appear to be.Therefore we try to discuss the question why capital markets, which are considered as efficient and perfect in theory, are volatile and imperfect in reality.The paper responds to this question by discussing mainly the irrational behavior of people by turning into the field of psychology. Furthermore it seeks for approaches of explanation conducted by different investment strategies contai...