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. (2008) Revealing weak-form inefficiency in a market for state contingent claims: The importance of market ecology, modelling procedures and investment strategies Economica, 77, (305), pp. 128-147. (doi:10.1111/j.1468-0335.2008.00716.x).

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Description/Abstract

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.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1111/j.1468-0335.2008.00716.x
ISSNs: 0013-0427 (print)
Subjects:

ePrint ID: 42532
Date :
Date Event
12 March 2008Submitted
1 September 2008Accepted/In Press
2010Published
Date Deposited: 15 Dec 2006
Last Modified: 16 Apr 2017 18:52
Further Information:Google Scholar
URI: http://eprints.soton.ac.uk/id/eprint/42532

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