Relationship between degree of efficiency and prediction in stock price changes

This study investigates empirically whether the degree of stock market efficiency is related to the prediction power of future price change using the indices of twenty seven stock markets. Efficiency refers to weak-form efficient market hypothesis (EMH) in terms of the information of past price changes. The prediction power corresponds to the hit-rate, which is the rate of the consistency between the direction of actual price change and that of predicted one, calculated by the nearest neighbor prediction method (NN method) using the out-of-sample. In this manuscript, the Hurst exponent and the approximate entropy (ApEn) are used as the quantitative measurements of the degree of efficiency. The relationship between the Hurst exponent, reflecting the various time correlation property, and the ApEn value, reflecting the randomness in the time series, shows negative correlation. However, the average prediction power on the direction of future price change has the strongly positive correlation with the Hurst exponent, and the negative correlation with the ApEn. Therefore, the market index with less market efficiency has higher prediction power for future price change than one with higher market efficiency when we analyze the market using the past price change pattern. Furthermore, we show that the Hurst exponent, a measurement of the long-term memory property, provides more significant information in terms of prediction of future price changes than the ApEn and the NN method.Comment: 10 page

Income Distribution and Public Transfers as Social Safety Nets in Korea

Using 5-year balanced household panel data, this paper shows that the inequality of per capita income in Korea aggravated during the financial crisis in 1998. The decomposition analysis of income inequality by factor component shows that the dominant positive effect on the income inequality is by the asset income. Next is the wage income, followed by the other income. Furthermore, this paper shows that social safety net programs were not yet in place during the initial period of the crisis. Public transfers were not effective social safety net devices and did not contribute in decreasing income inequality. Private transfers, on the other hand, were effective devices and narrowed the disparity in household income.

Gravity model explained by the radiation model on a population landscape

Understanding the mechanisms behind human mobility patterns is crucial to improve our ability to optimize and predict traffic flows. Two representative mobility models, i.e., radiation and gravity models, have been extensively compared to each other against various empirical data sets, while their fundamental relation is far from being fully understood. In order to study such a relation, we first model the heterogeneous population landscape by generating a fractal geometry of sites and then by assigning to each site a population independently drawn from a power-law distribution. Then the radiation model on this population landscape, which we call the radiation-on-landscape (RoL) model, is compared to the gravity model to derive the distance exponent in the gravity model in terms of the properties of the population landscape, which is confirmed by the numerical simulations. Consequently, we provide a possible explanation for the origin of the distance exponent in terms of the properties of the heterogeneous population landscape, enabling us to better understand mobility patterns constrained by the travel distance.Comment: 14 pages, 4 figure