On the strategic origin of Brownian motion in finance

Meyer, Bernard De; Saley, Hadiza Moussa

doi:10.1007/s001820200120

“…LeRoy (1973) and Lucas (1978) provided theoretical proofs that efficient markets and the martingale or random walk hypothesis are two distinct ideas: martingale or random walk is neither necessary nor sufficient for an efficient market. In a similar way, De Meyer and Saley (2003) showed that stock market prices follow a martingale even if all available information is not reflected in stock market prices. In other terms, Efficient Market Hypothesis is not empirically refutable since a test of the random character of stock prices does not imply a test of efficiency.…”

Section: Ii3b) Market Efficiency and Its Practical Outcomes: Class mentioning

confidence: 90%

Efficient market hypothesis and fraud on the market theory a new perspective for class actions

Jovanovic

¹

,

Andreadakis

²

,

Schınckus

³

2016

Research in International Business and Finance

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“…In a similar way, Samuelson (1973), who gave a mathematical proof that prices may be permanently equal to the intrinsic value and fluctuate randomly, explained that the making of profits by some agents cannot be ruled out, contrary to the original definition of the EMH. In the same vein, De Meyer and Saley (2003) showed that stockmarket prices can follow a martingale even if all available information is not reflected in the prices. We can also mention Cutler, Poterba and Summers (1989), Longin (1996) and Cornell (2013) who showed that large daily price movements are not always related to the arrival of new information.…”

Section: Iv) What Is Wrong With Emh?mentioning

confidence: 98%

On the 'Usual' Misunderstandings between Econophysics and Finance: Some Clarifications on Modelling Approaches and Efficient Market Hypothesis

Ausloos

¹

,

Jovanovic

²

,

Schınckus

³

2018

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In line with the recent research and debates about econophysics and financial economics, this article discusses on usual misunderstandings between the two disciplines in terms of modelling and basic hypotheses. In the literature devoted to econophysics, the methodology used by financial economists is frequently considered as a top-down approach (starting from a priori "first principles") while econophysicists rather present themselves as scholars working with a (empirical data prone) bottom-up approach. Although this dualist perspective is very common in the econophysics literature, this paper claims that the distinction is very confusing and does not permit to reveal the essence of the differences between finance and econophysics. The distinction between these two fields is mainly investigated here through the lens of the Efficient Market Hypothesis in order to show that, in substance, econophysics and financial economics tend to have a similar approach implying that the misunderstanding between these two fields at the modelling level can therefore be overstepped.JEL classification: G1, B4, B5

show abstract

“…In a similar way, Samuelson (1973), who gave a mathematical proof that prices may be permanently equal to the intrinsic value and fluctuate randomly, explained that the making of profits by some agents cannot be ruled out, contrary to the original definition of the EMH. In the same vein, De Meyer and Saley (2003) showed that stockmarket prices can follow a martingale even if all available information is not reflected in the prices. We can also mention Cutler, Poterba and Summers (1989), Longin (1996) and Cornell (2013) who showed that large daily price movements are not always related to the arrival of new information.…”

Section: Or 98)mentioning

confidence: 99%

On the “usual” misunderstandings between econophysics and finance: Some clarifications on modelling approaches and efficient market hypothesis

Ausloos

¹

,

Jovanovic

²

,

Schınckus

³

2016

International Review of Financial Analysis

View full text Add to dashboard Cite

In line with the recent research and debates about econophysics and financial economics, this article discusses on usual misunderstandings between the two disciplines in terms of modelling and basic hypotheses. In the literature devoted to econophysics, the methodology used by financial economists is frequently considered as a top-down approach (starting from a priori "first principles") while econophysicists rather present themselves as scholars working with a (empirical data prone) bottom-up approach. Although this dualist perspective is very common in the econophysics literature, this paper claims that the distinction is very confusing and does not permit to reveal the essence of the differences between finance and econophysics. The distinction between these two fields is mainly investigated here through the lens of the Efficient Market Hypothesis in order to show that, in substance, econophysics and financial economics tend to have a similar approach implying that the misunderstanding between these two fields at the modelling level can therefore be overstepped.JEL classification: G1, B4, B5

show abstract

On the strategic origin of Brownian motion in finance

Cited by 63 publications

References 7 publications

Efficient market hypothesis and fraud on the market theory a new perspective for class actions

Efficient market hypothesis and fraud on the market theory a new perspective for class actions

On the 'Usual' Misunderstandings between Econophysics and Finance: Some Clarifications on Modelling Approaches and Efficient Market Hypothesis

On the “usual” misunderstandings between econophysics and finance: Some clarifications on modelling approaches and efficient market hypothesis

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