Revealing weak-form inefficiency in a market for state contingent claims: The importance of market ecology, modelling procedures and investment strategies
Sung, M. and Johnson, J.E.V. (2010) Revealing weak-form inefficiency in a market for state contingent claims: The importance of market ecology, modelling procedures and investment strategies. Economica, 77, (305), 128-147. (doi:10.1111/j.1468-0335.2008.00716.x).
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This paper examines the degree to which current prices discount historical prices in a market for state contingent claims. Conditional logit analysis is employed to predict winning probabilities, based on market prices in a betting market. These are used, together with various wagering strategies to yield substantial abnormal returns. Consequently, in contrast to the existing literature, the results suggest that the market is not weak form efficient. The disparity with previous efficiency studies highlights the importance of considering market ecology and of adopting an appropriate modelling procedure and investment strategy to fully exploit information contained in market prices.
|Subjects:||H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
H Social Sciences > HJ Public Finance
|Divisions:||University Structure - Pre August 2011 > School of Management
|Date Deposited:||15 Dec 2006|
|Last Modified:||01 Jun 2011 02:19|
|Contributors:||Sung, M. (Author)
Johnson, J.E.V. (Author)
|RDF:||RDF+N-Triples, RDF+N3, RDF+XML, Browse.|
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