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Optimizing a basket against the efficient market hypothesis

  • Frédéric Abergel


    (FiQuant - Chaire de finance quantitative - Ecole Centrale Paris, MAS - Mathématiques Appliquées aux Systèmes - EA 4037 - Ecole Centrale Paris)

  • Mauro Politi

    (FiQuant - Chaire de finance quantitative - Ecole Centrale Paris, MAS - Mathématiques Appliquées aux Systèmes - EA 4037 - Ecole Centrale Paris)

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    The possibility that the collective dynamics of a set of stocks could lead to a speci c basket violating the e cient market hypothesis is investigated. Precisely, we show that it is systematically possible to form a basket with a non-trivial autocorrelation structure when the examined time scales are of the order of tens of seconds. Moreover, we show that this situation is persistent enough to allow some kind of forecasting.

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    Paper provided by HAL in its series Post-Print with number hal-00773315.

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    Date of creation: 14 Dec 2012
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    Publication status: Published in Quantitative Finance, Taylor & Francis (Routledge), 2012, 13 (1), pp.13-23. <10.1080/14697688.2012.723821>
    Handle: RePEc:hal:journl:hal-00773315
    DOI: 10.1080/14697688.2012.723821
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