Using a Differential Evolutionary Algorithm to Test the Efficient Market Hypothesis
AbstractThe proposition that a relatively new technology such as a differential evolutionary algorithm (DEA) can violate the weak form of the efficient market hypothesis is tested using daily data from the Australian share market from 2000 until 2008. An option trading strategy based on forecasts from a DEA is shown to perform better than a buy and hold strategy over parts of the sample space and, on average, over all of it. Speculators may make supernormal profits using new methodologies however such profits are unlikely to be sustained. Copyright Springer Science+Business Media, LLC. 2012
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Bibliographic InfoArticle provided by Society for Computational Economics in its journal Computational Economics.
Volume (Year): 40 (2012)
Issue (Month): 4 (December)
Differential evolutionary algorithm; Market efficiency; Speculation; Arbitrage; G14; G17;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
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"On the Impossibility of Informationally Efficient Markets,"
Levine's Working Paper Archive
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- repec:pri:cepsud:111 is not listed on IDEAS
- Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Working Papers 111, Princeton University, Department of Economics, Center for Economic Policy Studies..
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