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## Efficient-market hypothesis - Wikipedia

The efficient-market hypothesis ..

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# A Null Hypothesis for the New Year | Flirting with Models

Arthur D. Roy (1952) demonstrates that the would not choose to hold the closed-end weight of an asset in a mean-variance efficient fund's NAV in a portfolio that contains the ten portfolio is equal to the expected excess return open-end funds. In this case, the ratio of the of the asset conditioned on the excess return intercept to the residual variance will be zero. of all other available assets being zero, divided From the regression estimation used to pro- by the variance of the asset's return condi- duce Table 1, the portfolio weight measure was tioned on all other available asset returns. constructed for all 52 funds. The average (me- This reasoning can be used to ascertain dian) measure is 0.009 (0.025). The t-value whether closed-end fund NAVs are redundant under the null hypothesis that the average measure is zero, is 0.67, implying that the average closed-end fund NAV is redundant given the ten open-end funds. A test of inter- cepts is similar. The average (median) inter- cept is -0.0004 (0.0010). The t-value under the null hypothesis that the average intercept is zero, is -0.44.

Both John H. Cochrane (1991) and G. William Schwert ( 1991), in reviews of Shiller's work, stress the importance of the joint hypothesis of excess volatility and a time-varying discount rate model. For example, many variance-bounds papers assume constant expected returns and, hence, constant discount rates through time. Even if a test allows time variation in expected returns, a variance-bounds test might reject the null hypothesis if the expected return process is misspecified. The test conducted in my paper assumes that the discount rate of the fund is equal to the discount rate of the fund's portfolio. Thus, a model of time-varying discount rates is unnecessary.

## MUTUAL FUNDS; QUBE PORTFOLIOS; THE WEIRD ..

Inferences from variance-bounds tests also are sensitive to the inclusion of different types of shareholder distributions. For example, most variance-bounds tests use dividends as the relevant cash distribution. Thus. other dis- tributions to shareholders, such as cash gen- erated from share repurchases and takeovers, are not considered. Although variance-bounds tests usually reject the null hypothesis of no excess volatility when dividends are used as the relevant distribution, Ackert and Smith (1993) fail to reject the null when a broader definition of distribution is used. Problems with distributions are avoided with volatility tests that use closed-end funds, since they fa- cilitate the comparison of two market-based prices.

## Performance hypothesis testing with the Sharpe ratio: …

• ### excess returns as a proxy for explaining ..

Efficient Market Hypothesis ..

• ### What is Efficient Market Hypothesis (EMH)

It concludes that excess returns cannot be achieved using technical analysis

• ### The efficient market hypothesis is also known by its acronym EMH

Importance of Efficiency Market Hypothesis - UK Essays

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