Questions tagged [market-efficiency]

An efficient market is one where the market price is an unbiased estimate of the true value of the investment.

8 questions with no upvoted or accepted answers
Filter by
Sorted by
Tagged with
6 votes
0 answers
151 views

Mathematical Representation of Adaptive Markets Hypothesis

It has been about 13 years since Andrew Lo published The Adaptive Markets Hypothesis. It provides valid criticism to Efficient Markets Hypothesis and brings lots of innovation over it. Unfortunately, ...
berkorbay's user avatar
  • 1,051
2 votes
0 answers
47 views

Cointegration between prices and dividends. How do I get the following expression?

Actually, I have two questions: 1. Let us assume that expected returns are constant. Then, we have the following expression for how the prices should be determined, provided that the operators are ...
Alchemy's user avatar
  • 171
1 vote
0 answers
84 views

Proof that points to an alternative explanation for the absence of autocorrelation in price movement

The absence of linear autocorrelation in asset price movement has been empirically observed countless times. It is usually accompanied by an explanation that goes something like this: If there was ...
stam_a's user avatar
  • 11
1 vote
0 answers
124 views

Why is it that returns at the efficient market hypothesis has to be risk-adjusted?

Let us assume the following situation: Average market return: $R_M = 8\%$ Risk-free rate: $R_F = 2\%$ Actual return of share A after one year: $R_{A} = 15\%$ Actual return of share B after one year: $...
Rainer Niemann's user avatar
1 vote
0 answers
433 views

Are BARRA's Multiple-Factor Risk models rational asset pricing models?

Barra's Multiple-Factor Models for risk (e.g. USE3, USE4, CNE5) are much like those models used in empirical asset pricing studies such as CAPM, Fama-French three-factor model and others. I'm not ...
Gödel's user avatar
  • 253
1 vote
0 answers
118 views

Problem with overlapping data when testing futures market efficiency

In my case non-overlapping data would represent the scenario where futures prices (3 months) do not correspond to the futures spot prices in terms of delivery date. For example, futures settlement ...
Ray's user avatar
  • 21
0 votes
1 answer
89 views

Latency (market updates) and link to market efficiency

In the book by Lehalle and laruelle - "market microstructure in practice" - "The trading activity of HFT updates limit orderbooks at a higher rate than the round trip for any non-...
shoonya's user avatar
  • 141
0 votes
0 answers
86 views

Good performance of naive forecasting in efficient markets

I am doing spot price forecasting for a market, and so far, the naive forecasting model, which forecasts with the last observed prices, is the best forecasting model. I know that it might be because ...
BSel's user avatar
  • 1