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Beating the Market? : A Mathematical Puzzle to Market Efficiency

Title data

Baumann, Michael Heinrich:
Beating the Market? : A Mathematical Puzzle to Market Efficiency.
Universität Bayreuth
Bayreuth , 2018 . - 59 p.

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Official URL: Volltext

Project information

Project financing: Bundesministerium für Bildung und Forschung
Hanns-Seidel-Stiftung
Promotionsstipendium

Abstract in another language

The efficient market hypothesis is highly discussed - supported and criticized - in economic literature. In its weakest form, it states that there are no price trends. When weakening the non-trending assumption only a little to arbitrary short, small, and fully unknown trends, I mathematically prove, for a specific class of control-based trading strategies, positive expected gains. Adjustments for risk and comparisons with buy-and-hold strategies do not satisfactorily solve the problem. In addition, in an exemplary backtesting study, when transaction costs and bid-ask-spreads are taken into account, I still observe, on average, positive gains. These strategies are model-free, i.e., a trader neither has to estimate market parameters as the trend's sign nor has to think about predictable patterns, etc. In this work, I bring together the economists' view on efficient markets and the engineers' view on feedback trading.

Further data

Item Type: Preprint, postprint, working paper, discussion paper
Keywords: Technical Analysis; Efficient Market Hypothesis; Robust Positive Expectation Property; Simultaneously Long Short Trading; Control-based Trading Strategies
Subject classification: JEL codes C02, G11, G14
MSC 91G10, 91G99, 91B70
Institutions of the University: Faculties
Faculties > Faculty of Mathematics, Physics und Computer Science
Faculties > Faculty of Mathematics, Physics und Computer Science > Department of Mathematics
Faculties > Faculty of Mathematics, Physics und Computer Science > Department of Mathematics > Chair Mathematics V (Applied Mathematics)
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I
Profile Fields
Profile Fields > Advanced Fields
Profile Fields > Advanced Fields > Nonlinear Dynamics
Research Institutions
Research Institutions > Research Centres
Research Institutions > Research Centres > Forschungszentrum für Modellbildung und Simulation (MODUS)
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
500 Science > 510 Mathematics
Date Deposited: 17 Aug 2018 09:56
Last Modified: 17 Aug 2018 09:56
URI: https://eref.uni-bayreuth.de/id/eprint/45528

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