Professional Documents
Culture Documents
Excess Volatility
Intuition of Efficiency
Reuters pigeons and the telegraph
Beepers & the internet
Must be hard to get rich
Psychological Factors
Gambling behavior
Overconfidence
Slowness to make money, futility of career
trying to prove others of ones ability
Siegel and Peter Lynch
Raskobs Calculation
Annuity formula (converted to terminal value)
shows that Raskob assumed 26% per year
returns:
1 5 ( 1 .0 1 9 6 ) 2 4 0
15
8 0 ,0 0 0
.0 1 9 6
.0 1 9 6
Technical Analysis
Robert D. Edwards & John Magee,
Technical Analysis of Stock Trends, 1948.
Hand drawing of charts, judgmental
interpretation of patterns
Difficult to test success of technical analysis
Harry Mamaysky, SOM finds some success
in their methods.
Random Walk
AR-1
100
95
Time Period
46
41
36
31
26
21
16
11
90
Obvious Examples of
Inefficiency
Tulipmania
Holland, 1630s.
Peter Garber, Famous First Bubbles
Mosaic virus, random-walk look
Free press began in Holland then.
F Statistic
F statistic with k, n-k-1 degrees of freedom,
where k = number of independent
(forecasting) variables and n = number of
observations:
F
/k
1 R 2 / ( n k 1 )