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Author: Christoph Weber Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
The efficiency of capital markets has been questioned almost as long as the efficient market hypothesis had been worked out. Numerous critics have been formulated against this hypothesis, questioning notably the behavioural assumptions underlying the efficient market hypothesis. The present contribution does not focus on the behavioural assumptions but rather looks at the implications of focusing purely on the objective of market efficiency when considering market design questions. Hence it aims at discussing the following, possibly rather fundamental issue: Is the objective of efficiency, which has guided most of the market reforms in the last decades, sufficient? Or has it to be complemented by the objective of robustness? Mathematical and engineering control theory has developed the concept of robust control (e.g. Zhou and Doyle, 1998) and it has been shown that there is always a trade-off between the efficiency of a control system and its robustness (cf. e.g. Safonov, 1981, Doyle et al., 1988). The efficiency of the system describes its reactions to disturbance signals. The lower the integral loss function over the so-called transfer or sensitivity function, the less a system is affected by disturbances such as demand fluctuations, and the more efficient is the control. The economic equivalent clearly is the maximisation of welfare, which results in an efficient economic system. Robustness by contrast is defined as stability of the control system in the presence of model uncertainty (deviations in the model parameters or misperceptions of the underlying system). These concepts are applied to the financial markets in their interaction with the real economy. The financial markets being understood as the controllers of real world activity through investments, the implications of misperceptions in the financial sphere are analysed both theoretically and in an application example. From the theory it may readily derived that financial markets providing efficient, i.e. welfare-optimal solutions, must have limitations with respect to robustness. Also in the application example it turns out that in the presence of potential misperception a reduction of irreversible cost shares in investments may lead to an increase in overall expected system costs. Hence improvements in (conventional) market efficiency may be counter-productive by facilitating misallocation of capital as a consequence of misperceptions in the financial markets. This leads to the conclusion that a sole focus on the efficiency objective in market design is problematic and some of the recent turmoil in financial markets may be explained by the lack of consideration given to robustness issues.
Author: Christoph Weber Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
The efficiency of capital markets has been questioned almost as long as the efficient market hypothesis had been worked out. Numerous critics have been formulated against this hypothesis, questioning notably the behavioural assumptions underlying the efficient market hypothesis. The present contribution does not focus on the behavioural assumptions but rather looks at the implications of focusing purely on the objective of market efficiency when considering market design questions. Hence it aims at discussing the following, possibly rather fundamental issue: Is the objective of efficiency, which has guided most of the market reforms in the last decades, sufficient? Or has it to be complemented by the objective of robustness? Mathematical and engineering control theory has developed the concept of robust control (e.g. Zhou and Doyle, 1998) and it has been shown that there is always a trade-off between the efficiency of a control system and its robustness (cf. e.g. Safonov, 1981, Doyle et al., 1988). The efficiency of the system describes its reactions to disturbance signals. The lower the integral loss function over the so-called transfer or sensitivity function, the less a system is affected by disturbances such as demand fluctuations, and the more efficient is the control. The economic equivalent clearly is the maximisation of welfare, which results in an efficient economic system. Robustness by contrast is defined as stability of the control system in the presence of model uncertainty (deviations in the model parameters or misperceptions of the underlying system). These concepts are applied to the financial markets in their interaction with the real economy. The financial markets being understood as the controllers of real world activity through investments, the implications of misperceptions in the financial sphere are analysed both theoretically and in an application example. From the theory it may readily derived that financial markets providing efficient, i.e. welfare-optimal solutions, must have limitations with respect to robustness. Also in the application example it turns out that in the presence of potential misperception a reduction of irreversible cost shares in investments may lead to an increase in overall expected system costs. Hence improvements in (conventional) market efficiency may be counter-productive by facilitating misallocation of capital as a consequence of misperceptions in the financial markets. This leads to the conclusion that a sole focus on the efficiency objective in market design is problematic and some of the recent turmoil in financial markets may be explained by the lack of consideration given to robustness issues.
Author: Mario Chinas Publisher: Library of Cyprus ISBN: 9789925755608 Category : Languages : en Pages : 114
Book Description
This is the Black & White version of the book, available at a discount, which does not include the research data and analysis tables. There is also a Full Colour version that includes all the research data and analysis tables. What is a Stock Market? How do stock markets operate? Who invests in a stock market and when is it an appropriate tool for investment? Why do we care if a stock market is efficient or not? Where can we find evidence of market efficiency? With what tools can we test market efficiency?These are some of the questions that this book approaches. The Efficient Market Hypothesis (EMH) is a theory in financial economics, developed by Eugene Fama, which states that asset prices fully reflect all available information. Thus, it is implied that stocks always trade at their fair value, making it impossible for investors to "beat the market" via technical or fundamental analysis, since market prices should only react to new information.There are three variants of the EMH: "weak," "semi-strong," and "strong" form. The weak form of the EMH claims that prices already reflect all past publicly available market information. The semi-strong form claims that prices reflect all publicly available information, thus price changes occur to reflect new publicly available information. The strong form adds to this that prices instantly reflect even hidden private "insider" information.Testing the EMH is no easy task: Quantifying the availability of information and its effect on prices and market efficiency is challenging, making research on the subject difficult, time consuming and open to criticism. However, anecdotal evidence suggests that markets at best reach semi-strong form efficiency, with weak form efficiency being the norm. However, even this is challenged by the critics of EMH, via concepts such as Behavioural Finance.This book aims to familiarise the reader with the concept of EMH, covering the fundamentals and relevant literature. We then discuss market efficiency tests for Weak Form Market Efficiency, examining in more detail the day-of-the-week effect and its significance on stock market efficiency. The day-of-the-week effect is defined as a pattern where a certain day of the week has abnormal returns continuously. It is an anomaly that violates the random walk hypothesis, and thus implies that a market is not Weak Form efficient.We put theory into practice through the Empirical Research section which is divided into two parts, looking at two different approaches to researching the day-of-the-week effect, via the examination of actual research examples on a small European stock exchange. Both of these Thesis tested the hypothesis of random walk to determine the authenticity of weak form market efficiency for a small emerging stock market within the EU (the Cyprus Stock Exchange).
Author: Charles Korsmo Publisher: ISBN: Category : Languages : en Pages : 79
Book Description
This spring, the Supreme Court will hear Halliburton v. Erica P. John Fund, the most important securities law case in a quarter century. The Court will reconsider Basic v. Levinson and the fraud-on-the-market doctrine, the doctrine that has made the modern securities fraud class action possible. I argue that -- contrary to the claims of the parties and of several of the Justices -- the Court need not pass judgment on the efficient capital markets hypothesis in order to pass judgment on the fraud-on-the-market doctrine. It is possible to accept the efficient capital markets hypothesis and reject the fraud-on-the-market doctrine, or to reject the efficient capital markets hypothesis and accept the fraud-on-the-market doctrine. I further demonstrate that it is not only unnecessary, but would also be profoundly unwise for the Justices to wade into the debate over market efficiency. While market efficiency is of little relevance to the debate over the fraud-on-the-market doctrine, it is central to numerous other contemporary legal debates, many of which are of far more fundamental importance than the fraud-on-the-market doctrine. Any Supreme Court pronouncements on market efficiency would be certain to resurface in these debates in ways the authors would not intend.
Author: Michael J. Aitken Publisher: ISBN: Category : Languages : en Pages : 61
Book Description
Notwithstanding that regulatory mandates require that all security market design changes pass the dual test of fairness and efficiency, most regulators have not even defined efficiency let alone fairness. It should therefore come as little surprise why design changes such as the introduction of algorithmic and high frequency trading or dark pools are causing considerable controversy in the marketplace. There is no evidence-based policy framework within which such changes can be meaningfully evaluated. In this work we seek to develop a Market Quality Framework in which as a start both fairness and efficiency are defined. From these definitions we establish a series of empirical proxies. Thereafter, we develop a systems estimation model and demonstrate its use by analyzing the 2004-2011 explosive growth in algorithmic trading (AT) on the London Stock Exchange and NYSE Euronext Paris. Our results show that greater AT increases market fairness and efficiency but only in top quintile stocks. We address the robustness of these results to end-of-quarter reporting deadlines and to trading before and after MiFID1, a 2007 regulatory regime that fragmented the market. In addition, we analyze the over-identifying restrictions, and perform both Hausman and Stock-Yogo tests of the exogeneity and strength of our AT instruments.
Author: Great Britain: Parliament: House of Commons: European Scrutiny Committee Publisher: The Stationery Office ISBN: 9780215045386 Category : Political Science Languages : en Pages : 158
Author: Niamh Moloney Publisher: ISBN: 019968720X Category : Business & Economics Languages : en Pages : 817
Book Description
The financial system and its regulation have undergone exponential growth and dramatic reform over the last thirty years. This period has witnessed major developments in the nature and intensity of financial markets, as well as repeated cycles of regulatory reform and development, often linked to crisis conditions. The recent financial crisis has led to unparalleled interest in financial regulation from policymakers, economists, legal practitioners, and the academic community, and has prompted large-scale regulatory reform. The Oxford Handbook of Financial Regulation is the first comprehensive, authoritative, and state of the art account of the nature of financial regulation. Written by an international team of leading scholars in the field, it takes a contextual and comparative approach to examine scholarly, policy, and regulatory developments in the past three decades. The first three parts of the Handbook address the underpinning horizontal themes which arise in financial regulation: financial systems and regulation; the organization of financial system regulation, including regional examples from the EU and the US; and the delivery of outcomes and regulatory techniques. The final three Parts address the perennial objectives of financial regulation, widely regarded as the anchors of financial regulation internationally: financial stability, market efficiency, integrity, and transparency; and consumer protection. The Oxford Handbook of Financial Regulation is an invaluable resource for scholars and students of financial regulation, economists, policy-makers and regulators.
Author: El Bachir Boukherouaa Publisher: International Monetary Fund ISBN: 1589063953 Category : Business & Economics Languages : en Pages : 35
Book Description
This paper discusses the impact of the rapid adoption of artificial intelligence (AI) and machine learning (ML) in the financial sector. It highlights the benefits these technologies bring in terms of financial deepening and efficiency, while raising concerns about its potential in widening the digital divide between advanced and developing economies. The paper advances the discussion on the impact of this technology by distilling and categorizing the unique risks that it could pose to the integrity and stability of the financial system, policy challenges, and potential regulatory approaches. The evolving nature of this technology and its application in finance means that the full extent of its strengths and weaknesses is yet to be fully understood. Given the risk of unexpected pitfalls, countries will need to strengthen prudential oversight.
Author: Great Britain: Parliament: House of Commons: European Scrutiny Committee Publisher: The Stationery Office ISBN: 9780215043955 Category : Political Science Languages : en Pages : 130
Author: Rui Cunha Marques Publisher: IWA Publishing ISBN: 1843393417 Category : Science Languages : en Pages : 341
Book Description
This book, published in collaboration with ERSAR, presents a unique account of governance and regulatory methods used by different countries, states and municipalities that will help regulators and governments all over the world to improve their regulatory approaches. It is the first book to compile such an amount of data about regulatory processes of a wide number of countries from the five continents. It discusses how the characteristics of water and wastewater services call for regulation and how different countries apply distinct regulatory methods. By showing 18 country case-studies, the book offers an interesting perspective as the regulatory models adopted vary immensely depending on geographical location, nature and strength of institutions and governments, political ideology, features and level of development of the countries. In addition, it provides examples of best practices that may be important for policy-makers to enhance the regulatory processes adopted in each country. It looks closely at rules imposed by state and local governments concerning regulatory issues and how they are being applied. Regulation of Water and Wastewater Services covers the fundamental and practical concepts and issues regarding the regulation of water and wastewater services. It describes and compares the regulatory methods adopted in several countries and provides a global overview on regulation. There is detailed coverage of topics such as quality of service regulation, economic regulation and public service obligations. This book is suitable for regulators, academic researchers and students, consultants, operators and managers, policy-makers and other stakeholders. Visit the IWA WaterWiki to read and share material related to this title: http://www.iwawaterwiki.org/xwiki/bin/view/Articles/RegulationofWaterandWastewaterServicesAninternationalcomparison Author: Rui Cunha Marques, Center of Urban and Regional Systems (CESUR), Instituto Superior Tecnico, Technical University of Lisbon in collaboration with the Portuguese Water and Waste Services Regulation Authority (ERSAR)
Author: Fereidoon Sioshansi Publisher: Academic Press ISBN: 0123978874 Category : Business & Economics Languages : en Pages : 678
Book Description
Energy Efficiency: Towards the End of Demand Growth is a detailed guide to new energy efficiency technologies and policy frameworks affecting the profitability of efficiency projects. The contributions drawn together by F.P. Sioshansi feature insights from recognized thought leaders, detailed examinations of evolving technologies, and practical case studies yielding best practices for project planners, implementers and financiers. This volume challenges the "more is better" paradigm in energy production, examining efficiency technologies and measurement across the supply chain. - Comparative financial analysis of efficiency vs. increased generation - Case studies from four continents highlight the examples of successful technologies and projects - Explains how existing and developing regulatory frameworks impact cost and implementation
Author: Christoph Weber
Author: Christoph Weber
Author: Mario Chinas
Author: Charles Korsmo
Author: Michael J. Aitken
Author: Great Britain: Parliament: House of Commons: European Scrutiny Committee
Author: Niamh Moloney
Author: El Bachir Boukherouaa
Author: Great Britain: Parliament: House of Commons: European Scrutiny Committee
Author: Rui Cunha Marques
Author: Fereidoon Sioshansi