【复旦大学 投资学】Section4 FamaEMH
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❖ Although the joint-hypothesis problem exists, we cannot deny the richness and usefulness of past empirical works.
2.The Main Areas of Research
❖ 1970 review: weak-form tests; semi-strong form tests and strong-form tests
Returns ❖ 4.Cross-Sectional Return Predictability ❖ 5.Event Studies ❖ 6.Tests for Private Information ❖ 7.Conclusions
1. The Theme
❖ Strong version of market efficiency hypothesis: information and trading costs are 0
New tests remain suspicious but give us some new methodologies.
❖ Event studies are discussed next briefly. Its most advantage is allowing a break between market efficiency and equilibrium-pricing issues
Efficient Capital Markets:Ⅱ
The Journal of Finance, Vol 46,No. 5(Dec,1991)
By Eugene F.Fama
Menu
❖ 1.The Theme ❖ 2.The Main Areas of Research ❖ 3.Return Predictability: Time-Varying Expected
❖ 2nd obstacle: The joint-hypothesis, the market efficiency is not testable but must be jointly tested with some equilibrium model (some asset pricing models), the test results will become ambiguous among both aspects
❖ Nowadays the above three developed into the following respectively: (1)tests for return predictability (2)event studies (3)tests for private information
❖ Weaker version: prices at the point where marginal benefit do not exceed MC.
❖ 1st obstacle: The positive costs make the strong version hypothesis false but it could provide a good benchmark and avoid thtices of market professionals
❖ Therefore, the purpose of this paper is that the market efficiency literature should improve our ability to describe the time-series and cross-section behavior of security returns.
❖ The tests for private information problem are also shadowed by the joint-hypothesis problem
3. Return Predictability: Time varying Expected Returns
❖ Research on time-series predictability of stock returns. Recent tests consider the forecast power of D/P, E/P and term structure variables. They also examine returns for longer horizons, not only short term predictability checked by the early work
Does the joint –hypothesis problem make empirical work on asset-pricing models uninteresting?
❖ The answer is absolutely no. ❖ It has changed our views about the behavior of returns and
❖ Return predictability is most detailed and the evidence of this topic is most controversial. New works believe returns are predictable from past returns, dividend yields and term structure variables. It reject the old models but head onto the joint-hypothesis problem: Does return predictability reflect rational variation through time in expected returns or irrational deviations of price from fundamental value?
2.The Main Areas of Research
❖ 1970 review: weak-form tests; semi-strong form tests and strong-form tests
Returns ❖ 4.Cross-Sectional Return Predictability ❖ 5.Event Studies ❖ 6.Tests for Private Information ❖ 7.Conclusions
1. The Theme
❖ Strong version of market efficiency hypothesis: information and trading costs are 0
New tests remain suspicious but give us some new methodologies.
❖ Event studies are discussed next briefly. Its most advantage is allowing a break between market efficiency and equilibrium-pricing issues
Efficient Capital Markets:Ⅱ
The Journal of Finance, Vol 46,No. 5(Dec,1991)
By Eugene F.Fama
Menu
❖ 1.The Theme ❖ 2.The Main Areas of Research ❖ 3.Return Predictability: Time-Varying Expected
❖ 2nd obstacle: The joint-hypothesis, the market efficiency is not testable but must be jointly tested with some equilibrium model (some asset pricing models), the test results will become ambiguous among both aspects
❖ Nowadays the above three developed into the following respectively: (1)tests for return predictability (2)event studies (3)tests for private information
❖ Weaker version: prices at the point where marginal benefit do not exceed MC.
❖ 1st obstacle: The positive costs make the strong version hypothesis false but it could provide a good benchmark and avoid thtices of market professionals
❖ Therefore, the purpose of this paper is that the market efficiency literature should improve our ability to describe the time-series and cross-section behavior of security returns.
❖ The tests for private information problem are also shadowed by the joint-hypothesis problem
3. Return Predictability: Time varying Expected Returns
❖ Research on time-series predictability of stock returns. Recent tests consider the forecast power of D/P, E/P and term structure variables. They also examine returns for longer horizons, not only short term predictability checked by the early work
Does the joint –hypothesis problem make empirical work on asset-pricing models uninteresting?
❖ The answer is absolutely no. ❖ It has changed our views about the behavior of returns and
❖ Return predictability is most detailed and the evidence of this topic is most controversial. New works believe returns are predictable from past returns, dividend yields and term structure variables. It reject the old models but head onto the joint-hypothesis problem: Does return predictability reflect rational variation through time in expected returns or irrational deviations of price from fundamental value?