To what extent can new web-based technology improve forecasts? Assessing the economic value of information derived from Virtual Globes and its rate of diffusion in a financial market

As the rate of information availability increases, the ability to use web-based technology to improve forecasting becomes increasingly important. We examine Virtual Globe technology and show how the arrival of unprecedented types of web-based information enhances the ability to forecast and can lead to significant, measurable economic benefits. Specifically, we use market prices in a betting market over an eighteen-year period to examine how new elevation data from Virtual Globes (VG) enabled improved forecasting decisions and we explore how this information diffused through the betting market. The results demonstrate how short-lived, profitable opportunities arise from the arrival of novel information, and the speed at which markets adapt over time to account fully for new data

¿Han sido los mercados bursátiles eficientes informacionalmente?

In this paper we study the testing of the stock market efficiency in the last fifteen years, for that we review the papers of ScienceDirect database to characterize the results in percent. We find that 60 % of papers rejects stock market efficiency, 35 % presents evidence of efficiency, and the remaining 5 % verifies a progressive improvement in efficiency due to economic reforms, faster information flow and the launch of new financial productsEn el presente trabajo se estudia la contrastación de la eficiencia demercados bursátiles en los últimos quince años, para ello se acude a la revisión de artículos de la base de datos ScienceDirect caracterizando los resultados de forma porcentual. Se encuentra que el 60 % de los trabajos rechaza la eficiencia del mercado, el 35 % presenta evidencia de eficiencia, y el 5 % restante verifica una mejora progresiva de la eficiencia debida a reformas económicas, mayor velocidad en el flujo de información y el lanzamiento de nuevos productos financieros

Patterns in stock market movements tested as random number generators

This paper shows that tests of Random Number Generators (RNGs) may be used to test the Efficient Market Hypothesis (EMH). It uses the Overlapping Serial Test (OST), a standard test in RNG research, to detect anomalous patterns in the distribution of sequences of stock market movements up and down. Our results show that most stock markets exhibit idiosyncratic recurrent patterns, contrary to the efficient market hypothesis; also that OST detects a different kind of non-randomness to standard econometric long- and short-memory tests. Exposure of these anomalies should contribute to making markets more efficient

Patterns in stock market movements tested as random number generators

This paper shows that tests of Random Number Generators (RNGs) may be used to test the Efficient Market Hypothesis (EMH). It uses the Overlapping Serial Test (OST), a standard test in RNG research, to detect anomalous patterns in the distribution of sequences of stock market movements up and down. Our results show that most stock markets exhibit idiosyncratic recurrent patterns, contrary to the efficient market hypothesis; also that OST detects a different kind of non-randomness to standard econometric long- and short-memory tests. Exposure of these anomalies should contribute to making markets more efficient

Efficient market hypothesis in South Africa: an analysis using the flexible form unit root test

An efficient stock market is characterised by prices that are reflective of all the information such that there are no opportunities for arbitrageurs. In an efficient market, it is impossible to beat the market, therefore it follows that stock prices in an efficient market should follow a random walk. This study investigates whether the Johannesburg Stock Exchange (JSE) is an efficient market using the JSE Top 40 listed stocks, thus the relevance of the EMH in the current South African market is analysed. A corerlation analysis is undertaken to find whether the individual stocks in the different sectors are correlated in their returns, or if there are any intersector correlations. This analysis showed that individual sector stocks are mostly correlated, however, the individual sector stocks do not show a relationship with common sectors. The data used is monthly data of the individual stocks from 31 January 1999 to 30 June 2018. The study takes into consideration that the period is post the Asian Contagion and during the dot.com bubble. Also considered is the Global Financial crisis that occurred in 2007/2008. The study period thus allows enough time for market corerction. The study utilises the conventional unit root tests; the augmented Dickey-Fuller (ADF), Phillips- Perron (PP) and the Kwiatkowski–Phillips–Schmidt–Shin (KPSS) tests. Also utilised are modified unit root tests of Elliot, Rothenburg and Stock (ERS) (1996) as well as Ng and Perron (2001). Due to criticisms of the initially utilised unit roots, the nonlinear test of Kapetanois et al. (2003) and the Flexible Fourier form (FFF) is employed. Based on the empirical analysis, the study demonstrates that although the studies received conflicting evidence the FFF demonstrates the most “power” of the tests, thus is deemed to provide more accurate results. This test provided evidence of stationarity in the JSE market, thus implying inefficiency. The results were different for only two of the forty stocks, namely, Shoprite and Bidvest which implied efficiency. The study thus found that the EMH is not relevant to the current South African market and other theories should be considered in analysing the market. This also provides a case for behavioural finance to be analysed, as the assumption that all investors are rational is questioned

Efficient market hypothesis in South Africa: an analysis using the flexible form unit root test

An efficient stock market is characterised by prices that are reflective of all the information such that there are no opportunities for arbitrageurs. In an efficient market, it is impossible to beat the market, therefore it follows that stock prices in an efficient market should follow a random walk. This study investigates whether the Johannesburg Stock Exchange (JSE) is an efficient market using the JSE Top 40 listed stocks, thus the relevance of the EMH in the current South African market is analysed. A corerlation analysis is undertaken to find whether the individual stocks in the different sectors are correlated in their returns, or if there are any intersector correlations. This analysis showed that individual sector stocks are mostly correlated, however, the individual sector stocks do not show a relationship with common sectors. The data used is monthly data of the individual stocks from 31 January 1999 to 30 June 2018. The study takes into consideration that the period is post the Asian Contagion and during the dot.com bubble. Also considered is the Global Financial crisis that occurred in 2007/2008. The study period thus allows enough time for market corerction. The study utilises the conventional unit root tests; the augmented Dickey-Fuller (ADF), Phillips- Perron (PP) and the Kwiatkowski–Phillips–Schmidt–Shin (KPSS) tests. Also utilised are modified unit root tests of Elliot, Rothenburg and Stock (ERS) (1996) as well as Ng and Perron (2001). Due to criticisms of the initially utilised unit roots, the nonlinear test of Kapetanois et al. (2003) and the Flexible Fourier form (FFF) is employed. Based on the empirical analysis, the study demonstrates that although the studies received conflicting evidence the FFF demonstrates the most “power” of the tests, thus is deemed to provide more accurate results. This test provided evidence of stationarity in the JSE market, thus implying inefficiency. The results were different for only two of the forty stocks, namely, Shoprite and Bidvest which implied efficiency. The study thus found that the EMH is not relevant to the current South African market and other theories should be considered in analysing the market. This also provides a case for behavioural finance to be analysed, as the assumption that all investors are rational is questioned

Inclusive business models? How SMEs are developing inclusive value chains and combating social exclusion in bottom-of-the-pyramid markets

Research suggests that private firms can contribute to addressing poverty by prioritising the inclusion of bottom-of-the-pyramid (BoP) communities in global financing, commerce and consumption value chains. However existing evidence have focused on large multinationals. An understanding of how small firms incorporate the inclusion of BoP communities in their value chain is critical remains under-researched. Drawing on the literature integrating entrepreneurship, inclusion and business model this article develops a qualitative study of how three agribusiness in Sierra Leone, Cameroon and Kenya. The findings highlight opportunities and challenges facing entrepreneurs in pursuing inclusive business opportunities African economies

Trading in chaos : analysis of active management in a fractal market.

Doctor of Philosophy in Finance. University of KwaZulu-Natal, Durban 2017.Many Nobel Laureates and thousands of academic papers have espoused the concept that risk is compensated by return. However, the low volatility anomaly - the phenomenon where low-risk stocks display markedly higher returns than the market portfolio on a risk-adjusted basis and vice versa - contradicts this basic finance principle of risk-return trade-off and is possibly one of the greatest anomalies in finance. Among the explanations for this anomaly are, the behavioural bias of overconfidence, agency problems and the type of manager compensation. This study investigates and confirms the low volatility anomaly on the Johannesburg Stock Exchange (JSE) using the risk-adjusted return measure of the Sharpe ratio. According to the Efficient Market Hypothesis, this is not expected to happen and consequently offers no explanation for this phenomenon. This study applies the Fractal Market Hypothesis (FMH) formalised within the framework of Chaos Theory, to explain the existence of the low volatility anomaly on the JSE. Building upon the Fractal Market Hypothesis to provide evidence on the behaviour of returns time series of selected indices of the JSE, the BDS test is applied to test for non-random chaotic dynamics and further applies the rescaled range analysis to ascertain mean reversion, persistence or randomness on the JSE. The BDS test confirms that all the indices considered in this study are not independent and identically distributed. Applying the re-scaled range analysis, the FTSE/JSE Top 40 and the FTSE/JSE All Share Index appear relatively efficient and riskier than the FTSE/JSE Small Cap Index, which exhibits significant persistence and appears to be less risky and less efficient contrary to the popular assertion that small cap indices are riskier than large cap indices. The study further analyses the three fundamentals of the FMH namely, the impact of information, the role of liquidity and time horizon on the top 40 and small cap indices. Information is not uniformly distributed among the two indices as the FTSE/JSE Top 40 index receives more publications form sources such as newspapers, online publications and journals as well as JSE issued news and historical company news. The FTSE/JSE Top 40 also receives more analyst coverage than the FTSE/JSE Small Cap Index. Using the absolute and normalised volume of trade as a proxy for liquidity, the FTSE/JSE Top 40 index exhibits a relatively higher level of liquidity than the FTSE/JSE Small Cap index. The study finds that domestic equity fund managers in South Africa hold in their portfolios, a disproportionately greater percentage of FTSE/JSE Top 40 companies relative to other companies on the JSE and concludes that these managers contribute to the low volatility anomaly on the JSE. The study further concludes that in line with the FMH, lack of information and the illiquidity of the FTSE/JSE Small Cap attracts long-term investors who become the dominant class of investors on the index and are compensated for taking on the risk of illiquidity in the form of illiquidity premium and low volatility. The highly liquid FTSE/JSE Top 40, which has relatively high availability of information on the other hand attracts different classes of investors with differing horizons who take opposite sides of each trade as different classes of investors interpret the same set of information differently. The high liquidity and information leads to high volatility as investors continually adjust their holdings with the emergence of new information. The high volatility and subsequent underperformance of the FTSE/JSE Top 40 therefore is a cost of efficiency and liquidity (liquidity discount). Studies on the FMH are generally focused on market crashes. This study provides a novel approach by using the FMH to explain the low-volatility anomaly. This synthesis of the FMH and the low volatility anomaly provides an alternative technique of evaluating risk and also provides insights into the efficiency of financial markets and contributes to the literature on the FMH as well as the low volatility anomaly

Modelos de optimización de redes de distribución

La hipótesis de eficiencia de los mercados financieros es una aproximación analítica que surge con la pretensión de explicar los movimientos de las cotizaciones de los activos financieros a lo largo del tiempo, y pivota sobre la idea de que los precios de dichos activos vienen determinados por el comportamiento racional de los agentes que interactúan en el mercado. En este sentido, la hipótesis de eficiencia sustenta que los precios de los valores reflejan toda la información accesible a los agentes en el momento en que se determinan, por lo que de cumplirse, no sería posible anticiparse a los cambios de precios y formular estrategias de inversión encaminadas a obtener cuantiosas rentabilidades. En otras palabras, no se podrían hacer predicciones acerca del comportamiento futuro del mercado. Aunque el origen teórico de la hipótesis de eficiencia se sitúa en 1990 con el trabajo de Bachelier, no es hasta 1965 cuando, por un lado, Samuelson fundamenta teóricamente dicha hipótesis, y por otro, Fama establece por primera vez el concepto de mercado eficiente. El término hipótesis de mercado eficiente fue acuñado por Roberts en un trabajo en el que, además, analiza la eficiencia desde un punto de vista informacional, lo cual le lleva a establecer una clasificación para el conjunto de información que distingue tres formas de eficiencia según el acceso creciente al mismo que tengan los agentes: débil, semi-fuerte y fuerte. Así, en la eficiencia débil la información disponible para los agentes es únicamente la que constituye la serie histórica de precios; en la semi-fuerte el conjunto de información incluye toda la información pública disponible para todos los agentes; y en la fuerte el conjunto de información está constituido por la información de las dos formas anteriores y otra de carácter privado que se conoce como información privilegiada. El interés que tiene la verificación de la hipótesis de eficiencia en un mercado financiero, tanto para los inversores como para las instituciones que intervienen en la regulación de los mercados bursátiles, radica en que proporciona un elemento de juicio que permite evaluar si se están dando o no las condiciones que se requieren para que todos los agentes que actúan en un mercado lo hagan al amparo de lo que se conoce como “juego justo”, esto es, en un escenario donde todos actúen en igualdad de condiciones, de manera que la expectativa de ganar sea igual a la de perder. Por otro lado, puesto que la globalización del entorno económico y financiero conduce a la internacionalización de las finanzas, resulta evidente que los acontecimientos acaecidos en cualquiera de los principales mercados bursátiles, sean positivos o negativos, se ven reflejados en el resto de mercados a medida que se van abriendo las sesiones de los mismos. Ello ocasiona que los flujos de inversión extranjera sean trasladados de unos mercados a otros en función de factores como la rentabilidad, el riesgo o la seguridad, entre otros, que ofrezca un determinado mercado o país. Pues bien, reflejo de lo anterior y de cómo los datos financieros quedan expuestos a mayor grado de inestabilidad cuando se propagan malas noticias provenientes de otros mercados, es lo que ocurrió tras la crisis de las hipotecas subprimes que comenzase en Estados Unidos en octubre de 2007. Dicha crisis repercutió rápidamente en el sistema financiero estadounidense trasladándose posteriormente, en concreto a comienzos de 2008, al resto de mercados en los que el desplome bursátil de la mayoría de las bolsas ocasionó una crisis financiera internacional. Se puede decir pues, que debido a la velocidad con la que pueden producirse las transacciones financieras, así como a la interconexión que tienen unos mercados con otros, los escenarios que se presentan en el mundo de las finanzas son tan cambiantes que, de cumplirse la hipótesis de mercado eficiente en cualquiera de ellos, debería hacerlo únicamente de forma transitoria. La forma débil de la hipótesis de eficiencia ha sido la protagonista indiscutible de gran parte de los estudios empíricos que se han realizado a lo largo de la historia. Asimismo, la mayoría de las aportaciones teóricas sobre la hipótesis de eficiencia débil la identifican con el hecho de que el modelo de fijación de precios de los activos financieros es el denominado paseo aleatorio (en sus formas 1, 2 ó 3) o el de martingala. Ahora bien, puesto que para obtener hipótesis contrastables derivadas del modelo de martingala es necesario imponer restricciones adicionales sobre las distribuciones de probabilidad subyacentes que conducen a alguna de las versiones de paseo aleatorio, parece lógico asumir como modelo de fijación de precios únicamente alguna de las formas del mismo. En concreto, los tipos de paseo aleatorio con los que se identifica la hipótesis de eficiencia débil son condiciones que se establecen sobre los rendimientos asociados a los precios de un activo financiero, las cuales se van relajando desde el paseo aleatorio 1 (que es el que establece condiciones más estrictas) hasta el paseo aleatorio 3 (que se corresponde con el más plausible en términos económicos al no ser tan restrictivo), lo cual hace posible evaluar el grado de la eficiencia débil. Aunque existen numerosos procedimientos que tradicionalmente han sido utilizados para contrastar la eficiencia débil de un mercado financiero tal como establece el modelo de paseo aleatorio, muchos de ellos contrastan únicamente alguna condición necesaria, pero no suficiente del citado modelo en cualquiera de sus formas (es el caso, por ejemplo, de los llamados métodos lineales que solo contrastan la incorrelación necesaria para los tres tipos de paseo aleatorio). Por otro lado, se encuentran los métodos no lineales que tienen en cuenta la posible existencia de relaciones de tipo no lineal en los rendimientos. En cualquier caso, la consecuencia de aplicar una prueba que solamente contrasta una condición necesaria, pero no suficiente, puede llevar a una conclusión errónea en alguno de los tipos de paseo aleatorio