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Martingales, Nonlinearity, And Chaos

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  • William Barnett

    (Department of Economics, The University of Kansas)

  • Apostolos Serletis

    (Department of Economics, The University of Calgary)

Abstract

In this article we provide a review of the literature with respect to the efficient markets hypothesis and chaos. In doing so, we contrast the martingale behavior of asset prices to nonlinear chaotic dynamics, discuss some recent techniques used in distinguishing between probabilistic and deterministic behavior in asset prices, and report some evidence. Moreover, we look at the controversies that have arisen about the available tests and results, and raise the issue of whether dynamical systems theory is practical in finance.

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File URL: http://www2.ku.edu/~kuwpaper/2009Papers/201225.pdf
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Bibliographic Info

Paper provided by University of Kansas, Department of Economics in its series WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS with number 201225.

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Length: 28 pages
Date of creation: Sep 2012
Date of revision: Sep 2012
Handle: RePEc:kan:wpaper:201225

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Keywords: Efficient markets hypothesis; Chaotic dynamics;

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References

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