Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword
Like this
8Activity
0 of .
Results for:
No results containing your search query
P. 1
Market Efficiency: Finance week 09

Market Efficiency: Finance week 09

Ratings:

5.0

(1)
|Views: 1,532 |Likes:
Published by IRPS

More info:

Published by: IRPS on Apr 26, 2008
Copyright:Public Domain

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PPT, PDF, TXT or read online from Scribd
See more
See less

05/09/2014

pdf

text

original

IPCOR421 Finance
Alex Kane
1
CLASS NOTES
WEEK IX
MARKET EFFICIENCY
Reading Assignment: BMA 13
IPCOR421 Finance
Alex Kane
2
How we think of time-series processes
\u2022The value of any RV (random variable) in a time series,
here price of a security, P(t), can be represented by:
P(t+1) = E(P) + e(t+1),
where E(P) is the expectation at time t for the price
at time t+1, and e(t+1) is a (zero-mean) surprise

\u2022This useful decomposition is just a tautology -- it is true by definition of expectation, E(P), and tells us nothing about the process of prices

\u2022In analyzing time series we ask: What do we know
about E(P) and e(t+1)?
IPCOR421 Finance
Alex Kane
3
Two alternative time series
\u2022Consider two alternative time series of daily prices

2. P(t+1) = P* + e(t+1),
where E(P)=P* is a known value that doesn\u2019t
change from day to day

3. P(t+1) = P(t) + e(t+1).
Here, E(P)=P(t) is changing daily. The
expectation for the next-day price is today\u2019s
price (this is called a random walk)

Activity (8)

You've already reviewed this. Edit your review.
1 hundred reads
1 thousand reads
Jenny Liu liked this
Akanksha Walia liked this
G S Sreekiran liked this
anubha88 liked this
cmtinv liked this
olegipod5053 liked this

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->