On the Power and Weakness of Rational Expectations: Logical Fallacies, Periodic Bubbles and Business Cycles

A popular interpretation of the Rational Expectations/Efficient Markets hypothesis states that, if the hypothesis holds, then market valuations must follow a random walk. This postulate has frequently been criticized on the basis of empirical evidence. Yet the assertion itself incurs what we could call 'fallacy of probability diffusion symmetry': although market efficiency does indeed imply that the mean (i.e. expected) path must be a random walk, if the probability diffusion process is asymmetric then the observed path will most closely resemble not the mean but the median, which does not necessarily follow a random walk. To illustrate the implications, this paper develops an efficient markets model where the median path of Tobin's q ratio displays regular cycles of bubbles and crashes reflecting an agency problem between investors and producers. The model is tested against US market data, with results suggesting that such a regular cycle does indeed exist and is statistically significant. The aggregate production function in Gracia (Uncertainty and Capacity Constraints: Reconsidering the Aggregate Production Function, 2011) is then put forward to show how financial fluctuations can drive the business cycle by periodically impacting aggregate productivity and, as a consequence, GDP growth

Where Brain, Body and World Collide

The production cross section of electrons from semileptonic decays of beauty hadrons was measured at mid-rapidity (|y| < 0.8) in the transverse momentum range 1 < pt < 8 Gev/c with the ALICE experiment at the CERN LHC in pp collisions at a center of mass energy sqrt{s} = 7 TeV using an integrated luminosity of 2.2 nb^{-1}. Electrons from beauty hadron decays were selected based on the displacement of the decay vertex from the collision vertex. A perturbative QCD calculation agrees with the measurement within uncertainties. The data were extrapolated to the full phase space to determine the total cross section for the production of beauty quark-antiquark pairs

Underlying Event measurements in pp collisions at root s=0.9 and 7 TeV with the ALICE experiment at the LHC

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq)We present measurements of Underlying Event observables in pp collisions at root s = 0 : 9 and 7 TeV. The analysis is performed as a function of the highest charged-particle transverse momentum p(T),L-T in the event. Different regions are defined with respect to the azimuthal direction of the leading (highest transverse momentum) track: Toward, Transverse and Away. The Toward and Away regions collect the fragmentation products of the hardest partonic interaction. The Transverse region is expected to be most sensitive to the Underlying Event activity. The study is performed with charged particles above three different p(T) thresholds: 0.15, 0.5 and 1.0 GeV/c. In the Transverse region we observe an increase in the multiplicity of a factor 2-3 between the lower and higher collision energies, depending on the track p(T) threshold considered. Data are compared to PYTHIA 6.4, PYTHIA 8.1 and PHOJET. On average, all models considered underestimate the multiplicity and summed p(T) in the Transverse region by about 10-30%.7Calouste Gulbenkian Foundation from LisbonSwiss Fonds Kidagan, ArmeniaConselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq)Financiadora de Estudos e Projetos (FINEP)Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)National Natural Science Foundation of China (NSFC)Chinese Ministry of Education (CMOE)Ministry of Science and Technology of China (MSTC)Ministry of Education and Youth of the Czech RepublicDanish Natural Science Research CouncilCarlsberg FoundationDanish National Research FoundationEuropean Research Council under European CommunityHelsinki Institute of PhysicsAcademy of FinlandFrench CNRS-IN2P3Region Pays de LoireRegion AlsaceRegion AuvergneCEA, FranceGerman BMBFHelmholtz AssociationGeneral Secretariat for Research and Technology, Ministry of Development, GreeceHungarian OTKANational Office for Research and Technology (NKTH)Department of Atomic EnergyDepartment of Science and Technology of the Government of IndiaIstituto Nazionale di Fisica Nucleare (INFN) of ItalyMEXT, JapanJoint Institute for Nuclear Research, DubnaNational Research Foundation of Korea (NRF)CONACYTDGAPA, MexicoALFA-ECHELEN Program (High-Energy physics Latin-American-European Network)Stichting voor Fundamenteel Onderzoek der Materie (FOM)Nederlandse Organisatie voor Wetenschappelijk Onderzoek (NWO), NetherlandsResearch Council of Norway (NFR)Polish Ministry of Science and Higher EducationNational Authority for Scientific Research - NASR (Autoritatea Nationala pentru Cercetare Stiintifica - ANCS)Federal Agency of Science of the Ministry of Education and Science of Russian FederationInternational Science and Technology Center, Russian Academy of SciencesRussian Federal Agency of Atomic EnergyRussian Federal Agency for Science and InnovationsCERN-INTASMinistry of Education of SlovakiaDepartment of Science and Technology, South AfricaCIEMATEELAMinisterio de Educacion y Ciencia of SpainXunta de Galicia (Conselleria de Educacion)CEADENCubaenergia, CubaIAEA (International Atomic Energy Agency)Swedish Reseach Council (VR)Knut & Alice Wallenberg Foundation (KAW)Ukraine Ministry of Education and ScienceUnited Kingdom Science and Technology Facilities Council (STFC)The United States Department of EnergyUnited States National Science FoundationState of TexasState of OhioFundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq