The Ascent Of Market Efficiency
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The Ascent Of Market Efficiency
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Author : Simone Polillo
language : en
Publisher: Cornell University Press
Release Date : 2020-08-15
The Ascent Of Market Efficiency written by Simone Polillo and has been published by Cornell University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-08-15 with Business & Economics categories.
The Ascent of Market Efficiency weaves together historical narrative and quantitative bibliometric data to detail the path financial economists took in order to form one of the central theories of financial economics—the influential efficient-market hypothesis—which states that the behavior of financial markets is unpredictable. As the notorious quip goes, a blindfolded monkey would do better than a group of experts in selecting a portfolio of securities, simply by throwing darts at the financial pages of a newspaper. How did such a hypothesis come to be so influential in the field of financial economics? How did financial economists turn a lack of evidence about systematic patterns in the behavior of financial markets into a foundational approach to the study of finance? Each chapter in Simone Polillo's fascinating meld of economics, science, and sociology focuses on these questions, as well as on collaborative academic networks, and on the values and affects that kept the networks together as they struggled to define what the new field of financial economics should be about. In doing so, he introduces a new dimension—data analysis—to our understanding of the ways knowledge advances. There are patterns in the ways knowledge is produced, and The Ascent of Market Efficiency helps us make sense of these patterns by providing a general framework that can be applied equally to other social and human sciences.
The Efficient Market Theory And Evidence
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Author : Andrew Ang
language : en
Publisher: Now Publishers Inc
Release Date : 2011
The Efficient Market Theory And Evidence written by Andrew Ang and has been published by Now Publishers Inc this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Business & Economics categories.
The Efficient Market Hypothesis (EMH) asserts that, at all times, the price of a security reflects all available information about its fundamental value. The implication of the EMH for investors is that, to the extent that speculative trading is costly, speculation must be a loser's game. Hence, under the EMH, a passive strategy is bound eventually to beat a strategy that uses active management, where active management is characterized as trading that seeks to exploit mispriced assets relative to a risk-adjusted benchmark. The EMH has been refined over the past several decades to reflect the realism of the marketplace, including costly information, transactions costs, financing, agency costs, and other real-world frictions. The most recent expressions of the EMH thus allow a role for arbitrageurs in the market who may profit from their comparative advantages. These advantages may include specialized knowledge, lower trading costs, low management fees or agency costs, and a financing structure that allows the arbitrageur to undertake trades with long verification periods. The actions of these arbitrageurs cause liquid securities markets to be generally fairly efficient with respect to information, despite some notable anomalies.
Adaptive Markets
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Author : Andrew W. Lo
language : en
Publisher: Princeton University Press
Release Date : 2019-05-14
Adaptive Markets written by Andrew W. Lo and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-05-14 with Business & Economics categories.
A new, evolutionary explanation of markets and investor behavior Half of all Americans have money in the stock market, yet economists can’t agree on whether investors and markets are rational and efficient, as modern financial theory assumes, or irrational and inefficient, as behavioral economists believe. The debate is one of the biggest in economics, and the value or futility of investment management and financial regulation hangs on the answer. In this groundbreaking book, Andrew Lo transforms the debate with a powerful new framework in which rationality and irrationality coexist—the Adaptive Markets Hypothesis. Drawing on psychology, evolutionary biology, neuroscience, artificial intelligence, and other fields, Adaptive Markets shows that the theory of market efficiency is incomplete. When markets are unstable, investors react instinctively, creating inefficiencies for others to exploit. Lo’s new paradigm explains how financial evolution shapes behavior and markets at the speed of thought—a fact revealed by swings between stability and crisis, profit and loss, and innovation and regulation. An ambitious new answer to fundamental questions about economics and investing, Adaptive Markets is essential reading for anyone who wants to understand how markets really work.
Efficiency Versus Robustness Of Markets Why Improving Market Efficiency Should Not Be The Only Objective Of Market Regulation
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Author : Christoph Weber
language : en
Publisher:
Release Date : 2010
Efficiency Versus Robustness Of Markets Why Improving Market Efficiency Should Not Be The Only Objective Of Market Regulation written by Christoph Weber and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
The efficiency of capital markets has been questioned almost as long as the efficient market hypothesis had been worked out. Numerous critics have been formulated against this hypothesis, questioning notably the behavioural assumptions underlying the efficient market hypothesis. The present contribution does not focus on the behavioural assumptions but rather looks at the implications of focusing purely on the objective of market efficiency when considering market design questions. Hence it aims at discussing the following, possibly rather fundamental issue: Is the objective of efficiency, which has guided most of the market reforms in the last decades, sufficient? Or has it to be complemented by the objective of robustness? Mathematical and engineering control theory has developed the concept of robust control (e.g. Zhou and Doyle, 1998) and it has been shown that there is always a trade-off between the efficiency of a control system and its robustness (cf. e.g. Safonov, 1981, Doyle et al., 1988). The efficiency of the system describes its reactions to disturbance signals. The lower the integral loss function over the so-called transfer or sensitivity function, the less a system is affected by disturbances such as demand fluctuations, and the more efficient is the control. The economic equivalent clearly is the maximisation of welfare, which results in an efficient economic system. Robustness by contrast is defined as stability of the control system in the presence of model uncertainty (deviations in the model parameters or misperceptions of the underlying system). These concepts are applied to the financial markets in their interaction with the real economy. The financial markets being understood as the controllers of real world activity through investments, the implications of misperceptions in the financial sphere are analysed both theoretically and in an application example. From the theory it may readily derived that financial markets providing efficient, i.e. welfare-optimal solutions, must have limitations with respect to robustness. Also in the application example it turns out that in the presence of potential misperception a reduction of irreversible cost shares in investments may lead to an increase in overall expected system costs. Hence improvements in (conventional) market efficiency may be counter-productive by facilitating misallocation of capital as a consequence of misperceptions in the financial markets. This leads to the conclusion that a sole focus on the efficiency objective in market design is problematic and some of the recent turmoil in financial markets may be explained by the lack of consideration given to robustness issues.
Some Joint Tests Of Market Efficiency
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Author : Richard T. Baillie
language : en
Publisher:
Release Date : 1984
Some Joint Tests Of Market Efficiency written by Richard T. Baillie and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1984 with categories.
The Market Revolution And Its Limits
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Author : Alan Shipman
language : en
Publisher: Routledge
Release Date : 2002-01-22
The Market Revolution And Its Limits written by Alan Shipman and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-01-22 with Business & Economics categories.
The Market Revolution and its limits summarises why many economists believe that markets are best. It explores how even 'market failures' can be given market solutions, and asks why market ideas seem to have taken such a firm hold. Non-polemical in its approach, this book provides a comprehensive appraisal of the market and its alternatives, backed up with empirical international illustrations. Shipman concludes that the 'revolution' lies in redefining the market process rather than the market outcome.
Market Efficiency And Real Efficiency
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Author : Itay Goldstein
language : en
Publisher:
Release Date : 2016
Market Efficiency And Real Efficiency written by Itay Goldstein and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
We study a model to explore the (dis)connect between market efficiency and real efficiency when real decision makers learn information from the market to guide their actions. We emphasize two channels that determine whether the two efficiency concepts are aligned. The "externality channel" says that individual learning outcomes may not always map into real efficiency because the presence of externality causes real decision makers to overuse the price information. The "(mis)match channel" emphasizes the fact that market efficiency concerns how much information the market reveals about the overall firm value, while improving real efficiency needs the market to reveal much information that is relevant for real decisions. Our analysis highlights the delicate link between market efficiency and real efficiency.
Market Sense And Nonsense
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Author : Jack D. Schwager
language : en
Publisher: John Wiley & Sons
Release Date : 2012-11-06
Market Sense And Nonsense written by Jack D. Schwager and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-11-06 with Business & Economics categories.
Bestselling author, Jack Schwager, challenges the assumptions at the core of investment theory and practice and exposes common investor mistakes, missteps, myths, and misreads When it comes to investment models and theories of how markets work, convenience usually trumps reality. The simple fact is that many revered investment theories and market models are flatly wrong—that is, if we insist that they work in the real world. Unfounded assumptions, erroneous theories, unrealistic models, cognitive biases, emotional foibles, and unsubstantiated beliefs all combine to lead investors astray—professionals as well as novices. In this engaging new book, Jack Schwager, bestselling author of Market Wizards and The New Market Wizards, takes aim at the most perniciously pervasive academic precepts, money management canards, market myths and investor errors. Like so many ducks in a shooting gallery, Schwager picks them off, one at a time, revealing the truth about many of the fallacious assumptions, theories, and beliefs at the core of investment theory and practice. A compilation of the most insidious, fundamental investment errors the author has observed over his long and distinguished career in the markets Brings to light the fallacies underlying many widely held academic precepts, professional money management methodologies, and investment behaviors A sobering dose of real-world insight for investment professionals and a highly readable source of information and guidance for general readers interested in investment, trading, and finance Spans both traditional and alternative investment classes, covering both basic and advanced topics As in his best-selling Market Wizard series, Schwager manages the trick of covering material that is pertinent to professionals, yet writing in a style that is clear and accessible to the layman
Market Efficiency And Learning In An Artificial Stock Market
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Author : H.A. Benink
language : en
Publisher:
Release Date : 2007
Market Efficiency And Learning In An Artificial Stock Market written by H.A. Benink and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
An agent-based artificial financial market (AFM) is used to study market efficiency and learning in the context of the Neo-Austrian economic paradigm. Efficiency is defined in terms of the excess profits associated with different trading strategies, where excess is defined relative to a dynamic buy and hold benchmark in order to make a clean separation between trading gains and market gains. We define an Inefficiency matrix that takes into account the difference in excess profits of one trading strategy versus another (signal) relative to the standard error of those profits (noise) and use this statistical measure to gauge the degree of market efficiency. A one-parameter family of trading strategies is considered, the value of the parameter measuring the relative informational advantage of one strategy versus another. Efficiency is then investigated in terms of the composition of the market defined in terms of the relative proportions of traders using a particular strategy and the parameter values associated with the strategies. We show that markets are more efficient when informational advantages are small (small signal) and when there are many coexisting signals. Learning is introduced by considering copycat traders that learn the relative values of the different strategies in the market and copy the most successful one. We show how such learning leads to a more informationally efficient market but can also lead to a less efficient market as measured in terms of excess profits. It is also shown how the presence of exogeneous information shocks that change trader expectations increases efficiency and complicates the inference problem of copycats.
Market Efficiency In The Age Of Big Data
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Author : Ian Martin
language : en
Publisher:
Release Date : 2019
Market Efficiency In The Age Of Big Data written by Ian Martin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with Assets (Accounting) categories.
Modern investors face a high-dimensional prediction problem: thousands of observable variables are potentially relevant for forecasting. We reassess the conventional wisdom on market efficiency in light of this fact. In our model economy, which resembles a typical machine learning setting, N assets have cash flows that are a linear function of J firm characteristics, but with uncertain coefficients. Risk-neutral Bayesian investors impose shrinkage (ridge regression) or sparsity (Lasso) when they estimate the J coefficients of the model and use them to price assets. When J is comparable in size to N, returns appear cross-sectionally predictable using firm characteristics to an econometrician who analyzes data from the economy ex post. A factor zoo emerges even without p-hacking and data-mining. Standard in-sample tests of market efficiency reject the no-predictability null with high probability, despite the fact that investors optimally use the information available to them in real time. In contrast, out-of-sample tests retain their economic meaning.