The assumption of economic rationality has given important significance to market efficiency, as it has been the basis for carrying out the construction of modern knowledge in standard finance. The result is the development of the most important insights of finance, such as the arbitrage pricing theory of Miller and Modigliani, the portfolio optimization of Markowitz, the capital asset pricing theory of Sharp, Lintner and Sharp and the pricing of Black, Scholes and Merton options. (Pompian, 2006 and Lo, 2005). At this stage, these advances provide a sophisticated mathematical approach to explaining what happens in real life. As a result, individuals who trade stocks and bonds use these theories under the assumption that the assets they are investing in have a similar value to the prices they are paying. In this way, according to market efficiency, current prices reflect all relevant information, so trading stocks in an attempt to beat the benchmark or produce above-average returns will not be possible without taking on above-average risk since with the arbitrage would cause prices to return to lower than average levels. their real or fundamental value (Malkiel, 2003). Arbitrage could be defined as a guaranteed risk-free trading opportunity to make a profit. In case an asset is in a situation of undervaluation, it will quickly attract the attention of rational investors who would benefit by purchasing the asset at a special price in large quantities, pushing the price to its fundamental value, hence the expected return. it is relatively higher than the risk involved (Barberis and Thaler, 2002 and Ritter, 2003). On the other hand, if an asset is overvalued, rational investors would sell it short, to take advantage of the correct...... middle of paper...... and intrinsic value of a portfolio at the end of the years In the 1990s, some Internet stocks accounted for half the market value. Therefore, if the result of financial analysts is correct, these huge technology companies would be worth only 50% of their current prices. So this could have been avoided if institutional investors took a short position on Internet stocks. But although they did so, it had little effect, because most market participants are individual investors who are overwhelmed by the good times, putting more buying pressure on this stock, driving prices up (Thaler, 1999, pp 15 ). So, this does not make any sense according to rational equilibrium, since the US Internet stock market pays more attention to people's emotions rather than fundamentals, so investors are not completely rational because their behavior also takes into account the functioning of the market..