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Martingales, Nonlinearity, and Chaos

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  • William A. Barnett

    (Washington University in St. Louis)

  • Apostolos Serletis

    (University of Calgary)

Abstract

In this paper 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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Bibliographic Info

Paper provided by EconWPA in its series Econometrics with number 9805003.

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Length: 26 pages
Date of creation: 03 Jun 1998
Date of revision:
Handle: RePEc:wpa:wuwpem:9805003

Note: Type of Document - Tex; prepared on IBM PC; pages: 26 ; figures: none. This paper has been invited for publication in a special issue of the Journal of Economic Dynamics and Control. The editors of the special issue are Cars Hommes and Dee Dechert. See
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Keywords: nonlinearity chaos martingales efficient markets;

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References

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