Market efficiency and the phase-lagging model of the price evolution
The paper presents a novel mathematical model of price evolution within the market. The model accounts for a finite time lag between the disturbance (news) and the market response to it. It follows from the model that any single disturbance brings the market out of its efficient state and the market is to come back into this state after some finite relaxation time. A quantitative measure of the market efficiency–the market efficiency coefficient–has been introduced. It has been demonstrated that a phase-lagging market is never either fully efficient or fully inefficient due to the finiteness of the frequency of disturbances (news) acting upon the market.
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Volume (Year): 387 (2008)
Issue (Month): 4 ()
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References listed on IDEAS
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- Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-436, June.
- Robert J. Shiller, 1980. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," NBER Working Papers 0456, National Bureau of Economic Research, Inc.
- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December. Full references (including those not matched with items on IDEAS)
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