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New procedures for testing whether stock price processes are martingales

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  • Kei Takeuchi
  • Akimichi Takemura
  • Masayuki Kumon
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    Abstract

    We propose procedures for testing whether stock price processes are martingales based on limit order type betting strategies. We first show that the null hypothesis of martingale property of a stock price process can be tested based on the capital process of a betting strategy. In particular with high frequency Markov type strategies we find that martingale null hypotheses are rejected for many stock price processes.

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    File URL: http://arxiv.org/pdf/0907.3273
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 0907.3273.

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    Date of creation: Jul 2009
    Date of revision: Feb 2010
    Publication status: Published in Computational Economics, vol.37, No.1, 67-88, 2010
    Handle: RePEc:arx:papers:0907.3273

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    Web page: http://arxiv.org/

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Masayuki Kumon & Akimichi Takemura & Kei Takeuchi, 2005. "Capital process and optimality properties of a Bayesian Skeptic in coin-tossing games," Papers math/0510662, arXiv.org, revised Sep 2008.
    2. LeRoy, Stephen F, 1989. "Efficient Capital Markets and Martingales," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1583-1621, December.
    3. Kei Takeuchi & Masayuki Kumon & Akimichi Takemura, 2008. "Multistep Bayesian strategy in coin-tossing games and its application to asset trading games in continuous time," Papers 0802.4311, arXiv.org, revised Mar 2008.
    4. repec:fth:calaec:13-89 is not listed on IDEAS
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    Cited by:
    1. Masayuki Kumon & Jing Li & Akimichi Takemura & Kei Takeuchi, 2012. "Bayesian logistic betting strategy against probability forecasting," Papers 1204.3496, arXiv.org.

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