Adaptive or efficient financial markets?
Abstract
Standard finance theory had a poor financial crisis, with its primary precepts of market-efficiency and the wisdom of markets looking to some almost silly. But it takes a theory to beat a theory and this Chapter explores the Adaptive Market Hypothesis (AMH) of Professor Lo as a worthy contender, replacement for, the more famous Efficient Markets Hypothesis (EMH). The virtues of the AMH over the EMH are explored with reference to recent research concerning the 2007/8 global financial crisis.
Keywords
Efficient/adaptive market hypothesis; Trading rules; Technical analysis; Evolutionary games/equilibria; History matters
A standard criticism of the behavioural approach is that, despite all its ...
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