Efficiency, Overreaction and Underreaction in Stock Markets. A Parsimonious Model of the Three Sided-Coin

2nd International Conference on Financial Theory and Engineering, pp. 617-622, Shanghai (China), 2011

6 Pages Posted: 18 Jul 2011 Last revised: 1 Aug 2011

Date Written: July 28, 2011

Abstract

The recent financial crisis rekindled the debate on the efficient nature of stock markets. Although the Efficient Market Hypothesis remains a benchmark for the financial theory, the necessity to conjugate it with the disequilibria observed in actual financial markets draws to wonder whether the two aspects can be held into a coherent theoretical framework. We discuss a model able to keep things together in a very parsimonious way; we also provide estimates referred to stock markets consistent with the model.

Keywords: Efficient Market Hypothesis, underreaction, overreaction, multifractional processes with random exponent, pointwise hölder exponent, stock indices

JEL Classification: C13, C22, C51, C52, G12, G14

Suggested Citation

Bianchi, Sergio and Pantanella, Alexandre, Efficiency, Overreaction and Underreaction in Stock Markets. A Parsimonious Model of the Three Sided-Coin (July 28, 2011). 2nd International Conference on Financial Theory and Engineering, pp. 617-622, Shanghai (China), 2011, Available at SSRN: https://ssrn.com/abstract=1888209

Sergio Bianchi (Contact Author)

University of Cassino ( email )

Via S. Angelo - Campus Folcara
Dept. of Economics and Law
Cassino, 03043
Italy
+3907762994846 (Phone)
+390776393034 (Fax)

HOME PAGE: http://www.docente.unicas.it/sergio_bianchi

Alexandre Pantanella

University of Cassino ( email )

Via S. Angelo, Loc. Folcara
Cassino, Frosinone 03043
Italy

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