Questions tagged [market-efficiency]
An efficient market is one where the market price is an unbiased estimate of the true value of the investment.
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Does AI-based trading assume efficient market hypothesis?
When we use AI (machine learning/deep learning) in trading does that assume efficient market hypothesis?
I know quantitative finance assumes price moves are random (efficient market hypothesis). Does ...
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Market Fragmentation
Consider a scenario where a security can be exchanged on two exchanges A and B. A trader who has access to A and B with same execution probabilities submit an order and split it between A and B ...
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Can MACD with a broad range of parameter combinations beat Buy and Hold under the Efficient Market Hypothesis?
I conducted a study with Moving Average Convergence Divergence (MACD)s in the range of
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Need help analysing results of an autocorrelations test result
I am a analysing weak-form efficiency of the NIFTY 100 Index (01-01-2014 to 31-01-2024). The first four lags have high p-value, hence they show randomness. however, all the rest of the lags do show ...
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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-...
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Estimate of realized spread
Given a dataset with second level information about open, high, low, close, volume and vwap of a stock - how can one estimate the realized spread - a simple estimate could be (high - low)- but can one ...
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What color financial time series are there?
There is a folklore white noise hypothesis related to (and equivalent to some forms of) the efficient market hypothesis in finance -see references below. But are there some asset pairs whose return ...
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Relation between CAPM and efficient market hypothesis [closed]
I am coming from a machine learning/time series forecasting background and are currently studying Asset Pricing.
I have a good understanding of what Markowitz Mean-Variance Optimization (MVO) does, ...
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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 ...
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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 ...
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Does the random walk theory assume a simple symmetric random walk?
Does the random walk theory assume a simple symmetric random walk? In other words: does the random walk theory assume that the price rises as often as it falls? I've been looking for an answer for a ...
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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: $...
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Why are there no papers about stock prediction with machine learning in leading financial journals?
I'm writing my master's thesis about stock price prediction using machine learning methods. During my literature review, I noticed that a lot of research produced on this topic is of poor quality, ...
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What mechanisms does the market use to brining an asset back to the market line, as defined by CAPM?
The Capital Asset Pricing Model (CAPM) model states that, on efficient market, expected return of an asset should be given by a linear function of its volatility (as measure by standard deviation of ...
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Fama: Efficient Capital Markets: A Review of Theory and Empirical Work - are martingales incorrect?
In his paper, Eugene Fama gives the definition of a "fair game" as given below. I disagree. AFAIK, a martingale has the following property: $E[X_{t+\tau} | X_t] = X_t$. What am I missing?
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