...TOPIC: STOCK MARKET PRICE BEHAVIOR SESSION CHAIRMAN: BURTON G. MALKIEL EFFICIENT CAPITAL MARKETS: A REVIEW OF THEORY AND EMPIRICAL WORK* EUGENE F. FAMA** I. INTRODUCTION THE PRIMARY ROLE of the capital market is allocation of ownership of the economy's capital stock. In general terms, the ideal is a market in which prices provide accurate signals for resource allocation: that is, a market in which firms can make production-investment decisions, and investors can choose among the securities that represent ownership of firms' activities under the assumption that security prices at any time "fully reflect" all available information. A market in which prices always "fully reflect" available information is called "efficient." This paper reviews the theoretical and empirical literature on the efficient markets model. After a discussion of the theory, empirical work concerned with the adjustment of security prices to three relevant information subsets is considered. First, weak form tests, in which the information set is just historical prices, are discussed. Then semi-strong form tests, in which the concern is whether prices efficiently adjust to other information that is obviously publicly available (e.g., announcements of annual earnings, stock splits, etc.) are considered. Finally, strong form tests concerned with whether given investors or groups have monopolistic access to any information relevant for price formation are reviewed.' We shall conclude that, with...
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...Georgia Athens, GA 30601 USA [qian, khaled]@cs.uga.edu ABSTRACT The Hurst exponent (H) is a statistical measure used to classify time series. H=0.5 indicates a random series while H>0.5 indicates a trend reinforcing series. The larger the H value is, the stronger trend. In this paper we investigate the use of the Hurst exponent to classify series of financial data representing different periods of time. Experiments with backpropagation Neural Networks show that series with large Hurst exponent can be predicted more accurately than those series with H value close to 0.50. Thus Hurst exponent provides a measure for predictability. KEY WORDS Hurst exponent, time series analysis, neural networks, Monte Carlo simulation, forecasting In time series forecasting, the first question we want to answer is whether the time series under study is predictable. If the time series is random, all methods are expected to fail. We want to identify and study those time series having at least some degree of predictability. We know that a time series with a large Hurst exponent has strong trend, thus it’s natural to believe that such time series are more predictable than those having a Hurst exponent close to 0.5. In this paper we use neural networks to test this hypothesis. Neural networks are nonparametric universal function approximators [9] that can learn from data without assumptions. Neural network forecasting models have been widely used in financial time series analysis during the last decade...
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...REVISITING MARKET EFFICIENCY: THE STOCK MARKET AS A COMPLEX ADAPTIVE SYSTEM by Michael J. Mauboussin, Credit Suisse First Boston t is time to shift the emphasis of the debate about market efficiency. Most academics and practitioners agree that markets are efficient by a reasonable operational criterion: there is no systematic way to exploit opportunities for superior gains. But we need to reorient the discussion to how this operational efficiency arises. The crux of the debate boils down to whether we should consider investors to be rational, well informed, and homogeneous—the backbone of standard capital markets theory—or potentially irrational, operating with incomplete information, and relying on varying decision rules. The latter characteristics are part and parcel of a relatively newly articulated phenomenon that researchers at the Santa Fe Institute and elsewhere call complex adaptive systems. Why should corporate managers care about how market efficiency arises? In truth, executives can make many corporate finance decisions independent of the means of market efficiency. But if complex adaptive systems do a better job explaining how markets work, there are critical implications for areas such as risk management and investor communications. I Take, for example, the earnings expectations game.1 In a complex adaptive system, the sum is greater than the parts. So it is not possible to understand the stock market by paying attention to individual analysts. Managers...
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...65。这表明选取的序列存在长期记忆性，因此基于实证结论得出我国股票市场并不是有效的。由此政府应该为减小金融市场波动，促进市场有效和稳定而加强规范信息的披露，对市场参与者教育，政府的监管等。 关键词： 股票市场；Hurst指数；长期记忆性；R/S分析 Abstract This paper introduces how to use the long memory theory on China's stock market return volatility analysis. The stock market is full of uncertainty. The stock market volatility is normal, moderate price wave motion is beneficial to improve market liquidity and activity, but the acuteness wave motion will destroy the market stability and investor confidence. China's stock market is an emerging market, the market fluctuation characteristic of high risk is particularly prominent. Therefore, to our country stock market fluctuation characteristic analysis contributes to the stability of our financial market, to promote economic development. This article from the research background and significance, reviews the long memory theory development as well as the predecessors research results. In the second chapter explains the theoretical base, such as: the volatility of stock market theory, long memory in terms of research includes its development process, including the long-term memory of the definition, characteristics, test method, long memory analysis of the causes and long memory theory basis, including the introduction of the fractal market theory and the efficient market theory. It emphatically introduced in this paper the analysis methods: R/S analysis. At the end of the thesis selects...
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...------------------------------------------------- Definitions[edit] Cybernetics has been defined in a variety of ways, by a variety of people, from a variety of disciplines. The Larry Richards Reader includes a listing by Stuart Umpleby of notable definitions:[6] * "Science concerned with the study of systems of any nature which are capable of receiving, storing and processing information so as to use it for control." — A. N. Kolmogorov * "The art of securing efficient operation." — Louis Couffignal[7] * "'The art of steersmanship': deals with all forms of behavior in so far as they are regular, or determinate, or reproducible: stands to the real machine -- electronic, mechanical, neural, or economic -- much as geometry stands to real object in our terrestrial space; offers a method for the scientific treatment of the system in which complexity is outstanding and too important to be ignored." — W. Ross Ashby * "A branch of mathematics dealing with problems of control, recursiveness, and information, focuses on forms and the patterns that connect." — Gregory Bateson * "The art of effective organization." — Stafford Beer * "The art and science of manipulating defensible metaphors." — Gordon Pask * "The art of creating equilibrium in a world of constraints and possibilities." — Ernst von Glasersfeld * "The science and art of understanding." — Humberto Maturana * "The ability to cure all temporary truth of eternal triteness." — Herbert Brun Other...
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...requirements, this is only to be used for illustration of where to begin the title) APA Writing Style and Mechanics Student Name University of Phoenix Include Course Number and Title for the course in which you are enrolled. GEN/300: Skills for Professional Development Faculty Name and Title February 18, 2004 UOP REQUIRED TITLE PAGE Centered on the page (as shown above), include in this order: • Title of Paper (Mixed upper and lower case letters; centered, see APA p. 296) • Your Name (first and last, do not include academic or license information, i.e., BSN, RN) • University of Phoenix • Course Number and Course Title • Facilitator’s Name and Title (first and last, with academic title, i.e., MSN, MBA, PhD) • Date Submitted **All lines are double-spaced (no single or triple-spacing) throughout the entire document. The standards outlined in this sample paper are within APA guidelines; however, your instructor may have additional requirements. APA Writing Style APA does not permit use of the word “Introduction” as a level heading. Instead, begin the text of the paper by including the same title as the title on the title page (centered, upper, and lower case ). See APA, p. 298, 5.17 2 APA Writing Style and Mechanics Indent the first line of each paragraph. Use the tab key, which should be set at five to seven spaces, or ½ inch. See APA, p. 289. The Publication Manual of the American...
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...THE B L A C K SWAN The HIGHLY I mpact IM of the PROBABLE Nassim Nicholas Taleb U.S.A. $26.95 Canada $34.95 is a highly improbable event with three principal characteristics: It is unpre dictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was. The astonishing success of Google was a black swan; so was 9 / 1 1 . For Nassim Nicholas Taleb, black swans underlie almost everything about our world, from the rise of religions to events in our own personal lives. A BLACK SWAN Why do we not acknowledge the phenomenon of black swans until after they occur? Part of the answer, according to Taleb, is that humans are hardwired to learn specifics when they should be focused on generalities. We concentrate on things we already know and time and time again fail to take into consideration what we don't know. We are, therefore, unable to truly estimate oppor tunities, too vulnerable to the impulse to simplify, narrate, and categorize, and not open enough to rewarding those who can imagine the "impossible." For years, Taleb has studied how we fool our selves into thinking we know more than we actually do. We restrict our thinking to the irrelevant and inconsequential, while large events continue to surprise us and shape our world. Now, in this reve latory book, Taleb explains everything we know about what we don't know. He offers...
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...Mangalore University, Mangalagangotri – 574199, Mangalore, DK, Karnataka, India 2 School of Management and Business Studies, Mahatma Gandhi University, P.D. Hills, Kottayam – 686560, Kerala State, India *Corresponding author: tmmallik@yahoo.com ABSTRACT This paper studies the volatility implications of the introduction of derivatives on stock market volatility in India using the S&P CNX Nifty Index as a benchmark. To account for non-constant error variance in the return series, a GARCH model is fitted by incorporating futures and options dummy variables in the conditional variance equation. We find clustering and persistence of volatility before and after derivatives, while listing seems to have no stabilisation or destabilisation effects on market volatility. The postderivatives period shows that the sensitivity of the index returns to market returns and any day-of-the-week effects have disappeared. That is, the nature of the volatility patterns has altered during the post-derivatives period. Keywords: conditional volatility, heteroscedasticity, volatility clustering, market efficiency INTRODUCTION The modelling of asset returns volatility continues to be one of the key areas of financial research as it provides substantial information on the risk patterns involved in investment and transaction processes. A number of works have been undertaken in this area. Given the fact that stock markets normally exhibit high levels of price volatility, which lead to...
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...article uses the Western name order. John von Neumann | Von Neumann in the 1940s | Born | Neumann János Lajos December 28, 1903 Budapest, Austria-Hungary | Died | February 8, 1957 (aged 53) Walter Reed General Hospital Washington, D.C. | Residence | United States | Nationality | Hungarian and American | Fields | Mathematics, physics, statistics, economics | Institutions | University of Berlin Princeton University Institute for Advanced Study Site Y, Los Alamos | Alma mater | University of Pázmány Péter ETH Zürich | Doctoral advisor | Lipót Fejér | Other academic advisors | László Rátz | Doctoral students | Donald B. Gillies Israel Halperin | Other notable students | Paul Halmos Clifford Hugh Dowker Benoit Mandelbrot[1] | Known for | [show] | Notable awards | Bôcher Memorial Prize (1938) Enrico Fermi Award (1956) | Signature | John von Neumann (/vɒn ˈnɔɪmən/; December 28, 1903 – February 8, 1957) was a Hungarian and American pure and applied mathematician, physicist, inventor and polymath. He made major contributions to a number of fields,[2] including mathematics (foundations of mathematics, functional analysis, ergodic theory, geometry, topology, and numerical analysis), physics (quantum mechanics, hydrodynamics, and fluid dynamics), economics (game theory), computing (Von Neumann architecture, linear programming, self-replicating machines, stochastic computing), and statistics.[3] He was a pioneer of the application of operator theory...
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...Part IV Emerging and Integrating Perspectives January-2007 MAC/ADSM Page-213 1403_985928_17_cha14 January-2007 MAC/ADSM Page-214 1403_985928_17_cha14 CHAPTER 14 Complexity Perspective Jean Boulton and Peter Allen Basic principles The notion that the world is complex and uncertain and potentially fast-changing is much more readily acceptable as a statement of the obvious than it might have been 30 years ago when complexity science was born. This emerging worldview sits in contradistinction to the view of the world as predictable, linear, measurable and controllable, indeed mechanical; it is the so-called mechanical worldview which underpins many traditional approaches to strategy development and general management theory (see Mintzberg, 2002 for an overview). The complexity worldview presents a new, integrated picture of the behaviour of organisations, marketplaces, economies and political infrastructures; these are indeed complex systems as we will explain below. Some of these behaviours are recognised in other theories and other empirical work. Complexity theory is unique in deriving these concepts through the lens of a coherent, self-consistent scientific perspective whilst nevertheless applying it to everyday, practical problems. These key principles can be summarised here: There is more than one possible future This is a very profound point. We are willing to accept the future may be too complicated to know, but the notion...
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...October 28, 2011 The Efficient-Market Hypothesis and the Financial Crisis Burton G. Malkiel* Abstract The world-wide financial crisis of 2008-2009 has left in its wake severely damaged economies in the United States and Europe. The crisis has also shaken the foundations of modern-day financial theory, which rested on the proposition that our financial markets were basically efficient. Critics have even suggested that the efficient--market–hypotheses (EMH) was in large part, responsible for the crises. This paper argues that the critics of EMH are using a far too restrictive interpretation of what EMH means. EMH does not imply that asset prices are always “correct.” Prices are always wrong, but no one knows for sure if they are too high or too low. EMH does not imply that bubbles in asset prices are impossible nor does it deny that environmental and behavioral factors cannot have profound influences on required rates of return and risk premiums. At its core, EMH implies that arbitrage opportunities for riskless gains do not exist in an *Princeton University. I am indebted to Alan Blinder and to the participants in the Russell Sage Conference on Economic Lessons From the Financial Crisis for extremely helpful comments. 2 efficiently functioning market and if they do appear from time to time that they do not persist. The evidence is clear that this version of EMH is strongly supported by the data. EMH can comfortably coexist with behavior finance, and the insights of Hyman...
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...behavioural anomalies. There is an old joke, widely told among economists, about an economist strolling down the street with a companion. They come upon a $100 bill lying on the ground, and as the companion reaches down to pick it up, the economist says, ‘Don’t bother – if it were a genuine $100 bill, someone would have already picked it up’. This humorous example of economic logic gone awry is a fairly accurate rendition of the efficient markets hypothesis (EMH), one of the most hotly contested propositions in all the social sciences. It is disarmingly simple to state, has far-reaching consequences for academic theories and business practice, and yet is surprisingly resilient to empirical proof or refutation. Even after several decades of research and literally thousands of published studies, economists have not yet reached a consensus about whether markets – particularly financial markets – are, in fact, efficient. The origins of the EMH can be traced back to the work of two...
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...MARKET by student Avised by Ten giao su Submitted to Ten khoa of Ten truong in the partial fulfilment of the requirements for the degree of Master of ...? Dissertation Committee ...Ten thanh vien hoi dong ABSTRACT In this paper, based on Bangia et. al (1999) Liquidity Adjusted Value at Risk, an explanation and demonstration for the importance of integrate liquidity risk component into Value at Risk Model are presented. The component is considered to be resulted from the exogenous liquidity risk, indeed, the bid-ask spread of a stock or a portfolio. This research is conducted from the analysis of an estimation of Value at Risk (VaR) and Liquidity adjusted Value at Risk for two portfolios containing stocks that are currently trading on Vietnamese Stock Market. After applying the Bangia Model to calculate, the backtesting will be executed to check the accuracy level of the results. The difference between the results of two portfolios, according to separate approaches will be the evidence to reach the conclusion of the research. Table of Contents List of tables v List of figures vi Chapter 1 – Introduction 1 1.1 BACKGROUND TO THE RESEARCH 1 1.2 REASONS FOR CHOOSING THE TOPIC 3 1.3 RESEARCH PURPOSES AND KEY RESEARCH QUESTIONS 3 1.4 STRUCTURE OF DISSERTATION 4 Chapter 2 - Literature review 6 2.1 RISK MANAGEMENT 6 2.2 LIQUIDITY RISK MANAGEMENT 7 2.2.1 Why manage Liquidity Risk? 7 2.2.2 Liquidity Risk Measurement 11 2.3...
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...predictability CHAPTER ONE INTRODUCTION 1.1 BACKGROUND TO THE STUDY The performance of an economy is dependent largely on the efficient performance of its financial markets, since they facilitate the financing of productive activity and hence national output and economic growth. In this research report, the key roles and function of the financial markets are highlighted with the thrust of the discussion on the core issue of how the market works; directly and indirectly. One of the most important factors for rapid economic development is the effective mobilization and allocation of scarce resources within an economy. These resources can be real or financial, but they are scarce and command a price. The establishment of effective and efficient channel for the mobilization and allocation of scarce financial resources is therefore essential. The financial market, comprising of the money and capital markets, occupies an important place in most economies of the world. The primary function of a financial market is to enable funds to be sufficiently allocated from the surplus units of the economy to the deficit units for productive investment. The greater the transmission efficiency is, the higher the rate of growth of the economy (Olowe, 1997). The money market trades only in securities or debt instruments maturing in less than twelve months, while in the capital market, longer term debts as well as equity instruments are traded. The complementarity between money market...
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...Education for Women Coimbatore -641043, TamilNadu, India 1 2 Abstract Financial liberalization and technology revolution have allowed the developments of new and more efficient delivery and processing channels as well as more innovative products and services in banking industry. Banking institutions are facing competition not only from each other but also from non-bank financial intermediaries as well as from alternative sources of financing. Another strategic challenge facing banking institutions today is the growing and changing needs and expectations of consumers in tandem with increased education levels and growing wealth. Consumers are becoming increasingly discerning and have become more involved in their financial decisions. This paper investigates the factors which are affecting the acceptance of ebanking services among the customers and also indicates level of concern regarding security and privacy issues in Indian context. Primary data was collected from 200 respondents through a structured questionnaire. Descriptive statistics was used to explain demographic profile of respondents and Factor and Regression analyses were used to know the factors affecting e-banking services among customer in India. The finding depicts many factors like security and privacy and awareness level increased the acceptance of e-banking services among Indian customers. The finding shows that if banks provide them necessary guidance and ensure safety of their accounts, customers are willing...
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