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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.
2018
Event: Seventeenth Annual European Economics and Finance Society Conference (EEFS2018) , 21.-24. Juni 2018 , Department of Economics, City, University of London, London, England.
(Conference item: Conference , Speech )

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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 strongest 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: Conference item (Speech)
Refereed: Yes
Institutions of the University: Faculties > Faculty of Mathematics, Physics und Computer Science > Department of Mathematics > Chair Mathematics V (Applied Mathematics)
Profile Fields > Advanced Fields > Nonlinear Dynamics
Research Institutions > Research Centres > Forschungszentrum für Modellbildung und Simulation (MODUS)
Faculties
Faculties > Faculty of Mathematics, Physics und Computer Science
Faculties > Faculty of Mathematics, Physics und Computer Science > Department of Mathematics
Profile Fields
Profile Fields > Advanced Fields
Research Institutions
Research Institutions > Research Centres
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
500 Science > 510 Mathematics
Date Deposited: 28 Aug 2018 06:41
Last Modified: 28 Aug 2018 06:41
URI: https://eref.uni-bayreuth.de/id/eprint/45589