A new perspective on the efficient market hypothesis and the joint hypothesis problem

Williams, David Matthew. (1998). A new perspective on the efficient market hypothesis and the joint hypothesis problem Honours Thesis, School of Economics, The University of Queensland.

       
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Author Williams, David Matthew.
Thesis Title A new perspective on the efficient market hypothesis and the joint hypothesis problem
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 1998
Thesis type Honours Thesis
Total pages 122
Language eng
Subjects 14 Economics
Formatted abstract The Efficient Market Hypothesis (EMH) is perhaps one of the most heavily debated propositions in financial economics. Despite a myriad of studies, the question of whether the equities market is efficient remains unresolved due to the perennial existence of the joint hypothesis problem. This joint hypothesis is that tests of market efficiency are invariably tests of the operational specification (model) of the EMH employed - as well as tests of efficiency itself Anomalous price behaviour can then be duplicity interpreted as either evidence of market inefficiency or risk misspecification. A voluminous literature is hence rendered inconclusive. This thesis launches a direct theoretical and empirical assault on the joint hypothesis problem. Although not without reservation, the dissertation finds in favour of the market inefficiency paradigm on the basis of theoretical superiority.

 
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