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Market Efficiency (market + efficiency)
Selected AbstractsEmerging Market Efficiencies: New Zealand's Maturation Experience in the Presence of Non-Linearity, Thin Trading and Asymmetric InformationINTERNATIONAL REVIEW OF FINANCE, Issue 1-2 2007CHARLES RAYHORN ABSTRACT This paper examines the efficiency of New Zealand's stock market by assessing the prevalence of thin trading, non-linearity and information asymmetry. We find that the efficiency of this emerging market has been enhanced over time due to regulatory changes and the transition of the New Zealand economy to a free market orientation. During the 1970s and 1980s, the stock market appears to have been inefficient with thin trading and non-linearity as leading causative agents. Our evaluation of non-linear models, adjusted for thin trading effects, however, strongly suggests that the New Zealand stock market has become more efficient since 1990. [source] The Dark Side of Information and Market Efficiency in E-Markets,DECISION SCIENCES, Issue 3 2006Varun Grover ABSTRACT Price dispersion reflects the differences in prices for identical products. While in physical markets such dispersion is prevalent due to high search costs, many researchers argue that search costs and price dispersion will be much lower in electronic markets (e-markets). Empirical evidence does not support this contention, and researchers have studied search costs, market factors, and service-quality factors to explain this dispersion. Previous research has largely assumed that more information is better. By ignoring the dark side of information, we argue that only a partial understanding of price dispersion is possible. In this article, information overload and equivocality are studied as two dark attributes of information that lead sellers to different pricing decisions in e-markets. Hypotheses relating these attributes to price dispersion are supported through analysis of 161 product markets. This work opens up new avenues in the study of e-markets and discusses the implications of these findings for research and practice on consumer and seller decisions. [source] Keynesian Beauty Contest, Accounting Disclosure, and Market EfficiencyJOURNAL OF ACCOUNTING RESEARCH, Issue 4 2008PINGYANG GAO ABSTRACT This paper examines the market efficiency consequences of accounting disclosure in the context of stock markets as a Keynesian beauty contest, an influential metaphor originally proposed by Keynes [1936] and recently formalized by Allen, Morris, and Shin [2006]. In such markets, public information plays an additional commonality role, biasing stock prices away from the consensus fundamental value toward public information. Despite this bias, I demonstrate that provisions of public information always drive stock prices closer to the fundamental value. Hence, as a main source of public information, accounting disclosure enhances market efficiency, and transparency should not be compromised on grounds of the Keynesian-beauty-contest effect. [source] Market Efficiency, Bounded Rationality, and Supplemental Business Reporting DisclosuresJOURNAL OF ACCOUNTING RESEARCH, Issue 2 2001J. Richard Dietrich The AICPA Special Committee on Financial Reporting has urged disclosure of relevant forward-looking information on risks and opportunities to supplement conventional financial statements. We conduct a laboratory market experiment to assess the effects of such disclosures on capital allocation decisions. We develop two sets of competing hypotheses regarding how capital markets react to supplemental disclosures. One set is based on the assumption of semi-strong market efficiency, while the other posits that the bounded rationality of individual traders leads to inefficient market prices. We find that explicit disclosure of management's best estimate of an uncertain quantity improves market efficiency, even though this disclosure is redundant with information in financial statements. Second, we find disclosure of an upper bound of management's estimate has the potential to bias security prices upward, while informationally equivalent disclosure of both upper and lower bounds removes this bias. These results suggest that experimental market reactions to these supplemental disclosures are inconsistent with market efficiency. Supplemental analyses of individuals' price predictions and trading behavior support our conclusion that inefficiencies are at least partially attributable to individual information processing biases. [source] Evaluating Commodity Market Efficiency: Are Cointegration Tests Appropriate?JOURNAL OF AGRICULTURAL ECONOMICS, Issue 3 2002Neil Kellard This paper investigates the claim that the finding of cointegration between commodity spot and lagged futures rates reflects the existence of commodity arbitrage and not, as is generally accepted, long-run market efficiency. The methodology of Kellard et al. (1999) is employed to match spot and lagged futures rates correctly for the UK wheat futures contract traded at LIFFE. Bi-variate analysis shows that spot and lagged futures rates are cointegrated with the vector (1, -1), a necessary condition for market efficiency. However, at variance with asymptotic theory, in a tri-variate VECM estimation, the spot rate, lagged futures rate and lagged domestic interest rate are shown to be cointegrated with the vector (1, ,1, 1). The "cointegration" paradox is explained by investigating the relative magnitudes of the forecast error and the domestic interest rate. The small sample results demonstrate that it is impossible to distinguish between the influence of commodity arbitrage and the existence of market efficiency using cointegration-based tests. In summary, this work implies that such tests are not wholly appropriate for evaluating commodity market efficiency. [source] Option Market Efficiency and Analyst RecommendationsJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 5-6 2010James S. Doran Abstract:, This paper examines the information content in option markets surrounding analyst recommendation changes. The sample includes 6,119 recommendation changes for optionable stocks over the period January 1996 through December 2005. As expected, mean underlying asset returns are positive (negative) on days of recommendation upgrades (downgrades). However, volatility levels and shifts prior to recommendation changes explain a significant portion of underlying asset price responses. Ex-ante price and volatility responses in option markets are linked to increased jump uncertainty risk premia. Our findings suggest information in option markets leads analyst recommendation changes, implying revisions contain less information than previously thought. [source] Commercial Mortgage-Backed Securities (CMBS) and Market Efficiency with Respect to Costly InformationREAL ESTATE ECONOMICS, Issue 3 2008Andreas D. Christopoulos Commercial mortgage-backed securities (CMBS) are complex asset-backed securities trading in markets that do not currently use derivatives pricing technology. This lack of usage is due to the complexity of the modeling exercise, and only the recent and costly availability of historical data. As such, CMBS markets provide a natural environment for the testing of market efficiency with respect to this costly information. Using this information, this article develops a CMBS pricing model to provide a joint test of the model and market efficiency. Backtesting our pricing model for 4 years, although there is some evidence of abnormal trading profits, we cannot reject the efficiency of the CMBS markets. [source] Market Efficiency and Return Statistics: Evidence from Real Estate and Stock Markets Using a Present-Value ApproachREAL ESTATE ECONOMICS, Issue 2 2001Yuming Fu This paper develops a methodology to identify asset price response to news in the framework of the Campbell,Shiller log-linear present-value equation. We further show that a slow price adjustment in real estate markets not only induces a high serial autocorrelation in excess returns, but also dampens the return volatility and the correlation with excess returns in other asset markets. Using Hong Kong real estate and stock market data, we find that the quarterly real estate price assimilates only about half the effect of market news, whereas the quarterly stock price incorporates the news fully. Our analysis identifies a cumulative price adjustment that recovers lost information in real estate returns due to market inefficiency and thereby restores the real estate return volatility and the correlation between real estate and stock markets. [source] Product Market Competition, Insider Trading, and Stock Market EfficiencyTHE JOURNAL OF FINANCE, Issue 1 2010JOEL PERESS ABSTRACT How does competition in firms' product markets influence their behavior in equity markets? Do product market imperfections spread to equity markets? We examine these questions in a noisy rational expectations model in which firms operate under monopolistic competition while their shares trade in perfectly competitive markets. Firms use their monopoly power to pass on shocks to customers, thereby insulating their profits. This encourages stock trading, expedites the capitalization of private information into stock prices and improves the allocation of capital. Several implications are derived and tested. [source] Presidential Address: Sophisticated Investors and Market EfficiencyTHE JOURNAL OF FINANCE, Issue 4 2009JEREMY C. STEIN ABSTRACT Stock-market trading is increasingly dominated by sophisticated professionals, as opposed to individual investors. Will this trend ultimately lead to greater market efficiency? I consider two complicating factors. The first is crowding,the fact that, for a wide range of "unanchored" strategies, an arbitrageur cannot know how many of his peers are simultaneously entering the same trade. The second is leverage,when an arbitrageur chooses a privately optimal leverage ratio, he may create a fire-sale externality that raises the likelihood of a severe crash. In some cases, capital regulation may be helpful in dealing with the latter problem. [source] Pension Plan Funding and Stock Market EfficiencyTHE JOURNAL OF FINANCE, Issue 2 2006FRANCESCO FRANZONI ABSTRACT The paper argues that the market significantly overvalues firms with severely underfunded pension plans. These companies earn lower stock returns than firms with healthier pension plans for at least 5 years after the first emergence of the underfunding. The low returns are not explained by risk, price momentum, earnings momentum, or accruals. Further, the evidence suggests that investors do not anticipate the impact of the pension liability on future earnings, and they are surprised when the negative implications of underfunding ultimately materialize. Finally, underfunded firms have poor operating performance, and they earn low returns, although they are value companies. [source] Labour Market Efficiency with Discriminatory UnionsBULLETIN OF ECONOMIC RESEARCH, Issue 3 2001John R. Dobson The paper considers ,efficient bargains', with a union that weighs the utilities of its members unequally and negotiates over group employment levels. Such discrimination may lead to socially inefficient overemployment of the dominant group, and underemployment of the group suffering discrimination. [source] Contracting With Uncertain Level Of TrustCOMPUTATIONAL INTELLIGENCE, Issue 4 2002Sviatoslav Braynov The paper investigates the impact of trust on market efficiency and bilateral contracts. We prove that a market in which agents are trusted to the degree they deserve to be trusted is as efficient as a market with complete trustworthiness. In other words, complete trustworthiness is not a necessary condition for market efficiency. We prove that distrust could significantly reduce market efficiency, and we show how to solve the problem by using appropriately designed multiagent contracts. The problem of trust is studied in the context of a bilateral negotiation game between a buyer and a seller. It is shown that if the seller's trust equals the buyer's trustworthiness, then the social welfare, the amount of trade, and the agents' utility functions are maximized. The paper also studies the efficiency of advance payment contracts as a tool for improving trustworthiness. It is proved that advance payment contracts maximize the social welfare and the amount of trade. Finally, the paper studies the problem of how to make agents truthfully reveal their level of trustworthiness. An incentive,compatible contract is defined, in which agents do not benefit from lying about their trustworthiness. The analysis and the solutions proposed in this paper could help agent designers avoid many market failures and produce efficient interaction mechanisms. [source] Independence in Appearance and in Fact: An Experimental Investigation,CONTEMPORARY ACCOUNTING RESEARCH, Issue 1 2003Nicholas Dopuch Abstract In this study, we use experimental markets to assess the effect of the Security and Exchange Commission's (SEC's) new independence rule on investors' perceptions of independence, investors' payoff distributions, and market prices. The new rule requires client firms to disclose in their annual proxy statements the amount of nonaudit fees paid to their auditors. The new disclosure is intended to inform investors of auditors' incentives to compromise their independence. Our experimental design is a 2 3 between-subjects design, where we control the presence (unbiased reports) or absence of auditor independence in fact (biased reports). While independence in fact was not immediately observable to investors, we controlled for independence in appearance by varying the public disclosure of the extent of nonaudit services provided by the auditor to the client. In one market setting, investors were not given any information about whether the auditor provided such nonaudit services; in a second setting, investors were explicitly informed that the auditor did not provide any non-audit services; and in a third setting, investors were told that the auditor provided nonaudit services that could be perceived to have an adverse effect on independence in fact. We found that disclosures of nonaudit services reduced the accuracy of investors' beliefs of auditors' independence in fact when independence in appearance was inconsistent with independence in fact. This then caused prices of assets to deviate more from their economic predictions (lower market efficiency) in the inconsistent settings relative to the no-disclosure and consistent settings. Thus, disclosures of fees for nonaudit services could reduce the efficiency of capital markets if such disclosures result in investors forming inaccurate beliefs of auditor independence in fact - that is, auditors appear independent but they are not independent in fact, or vice versa. The latter is the maintained position of the American Institute of Certified Public Accountants (AICPA), which argued against the new rule. Further research is needed to assess the degree of correspondence between independence in fact and independence in appearance. [source] On the Use of the Moving Average Trading Rule to Test for Weak Form Efficiency in Capital MarketsECONOMIC NOTES, Issue 2 2008Alexandros E. Milionis The examination for the possible existence of predictive power in the moving average trading rule has been used extensively to test the hypothesis of weak form market efficiency in capital markets. This work focuses mainly on the study of the variation of the moving average (MA) trading rule performance as a function of the length of the longer MA. Empirical analysis of daily data from NYSE and the Athens Stock Exchange reveal high variability of the performance of the MA trading rule as a function of the MA length and on some occasions the series of successive trading rule total returns is non-stationary. These findings have direct implications in weak form market efficiency testing. Indeed, given this high variability of the performance of the MA trading rule, by just finding out that trading rules with some specific combinations of MA lengths can or cannot beat the market, as is the case in most of the published work thus far, is not enough evidence for or against the existence of weak form market efficiency. Results also show that on average in about three out of four cases trading rule signals are false, a fact that leaves a lot of space for improved trading rule performance if trading rule signals are combined with other information (e.g. filters, or volume of trade). Finally, some evidence of enhanced trading rule performance for the shorter MA lengths was found. This enhanced performance is partly attributed to the higher probability that a trading rule signal is not a whipsaw, as well as to the larger number of days out-of-the-market which are associated with shorter MA lengths. [source] The Race Towards Transparency: An Experimental InvestigationECONOMIC NOTES, Issue 3 2002Marco Rossi To understand the current tendency toward transparency, we studied the effects of accounting disclosure in a laboratory. In our experiment, transparency in the financial accounts of the listed companies improved information efficiency; but, even after checking for fundamentals, the transparency increased the volatility of market prices. Moreover, transparency improved investors' utility, so that their preference for more certain assets emerged. Therefore, we argue that the current race toward transparency may be better explained by firms' and markets' intention to attract household investments rather than to improve market efficiency. (J.E.L.: G92, D44, D81, G12, G28). [source] Regulation of an Open Access Essential FacilityECONOMICA, Issue 300 2008AXEL GAUTIER A vertically integrated firm owns an essential input and operates on the downstream market. There is a potential entrant in the downstream market. Both firms use the same essential input. The regulator's objectives are (i) to ensure financing of the essential input and (ii) to generate competition in the downstream market. The regulatory mechanism grants non-discriminatory access of the essential facility to the entrant provided it pays a two-part tariff to the incumbent. The optimal mechanism generates inefficient entry. The inefficient entry captures the trade-off between market efficiency and infrastructure financing resulting from incomplete information and non-discriminatory access. [source] Short-run Returns around the Trades of Corporate Insiders on the London Stock ExchangeEUROPEAN FINANCIAL MANAGEMENT, Issue 1 2002Sylvain Friederich Previous work examined the long-run profitability of strategies mimicking the trades company directors in the shares of their own company, as a way of testing for market efficiency. The current paper examines patterns in abnormal returns in the days around these trades on the London Stock Exchange. We find movements in returns that are consistent with directors engaging in short-term market timing. We also report that some types of trades have superior predictive content over future returns. In particular, medium-sized trades are more informative for short-term returns than large ones, consistent with Barclay and Warner's (1993) ,stealth trading' hypothesis whereby informed traders avoid trading in blocks. Another contribution of this study is to properly adjust the abnormal return estimates for microstructure (spread) transactions costs using daily bid-ask spread data. On a net basis, we find that abnormal returns all but disappear. [source] Efficiency in the Pricing of the FTSE 100 Futures ContractEUROPEAN FINANCIAL MANAGEMENT, Issue 1 2001Joëlle Miffre This paper studies the pricing efficiency in the FTSE 100 futures contract by linking the predictable movements in futures returns to the time-varying risk and risk premia associated with prespecified factors. The results indicate that the predictability of the FTSE 100 futures returns is consistent with a conditional multifactor model with time-varying moments. The dynamics of the factor risk premia, combined with the variation in the betas, capture most of the predictable variance of returns, leaving little variation to be explained in terms of market inefficiency. Hence the predictive power of the instruments does not justify a rejection of market efficiency. [source] An explanation of the forward premium ,puzzle'EUROPEAN FINANCIAL MANAGEMENT, Issue 2 2000Richard Roll Existing literature reports a puzzle about the forward rate premium over the spot foreign exchange rate. The premium is often negatively correlated with subsequent changes in the spot rate. This defies economic intuition and possibly violates market efficiency. Rational explanations include non-stationary risk premia and econometric mis-specifications, but some embrace the puzzle as a guide to profitable trading. We suggest there is really no puzzle. A simple model fits the data: forward exchange rates are unbiased predictors of subsequent spot rates. The puzzle arises because the forward rate, the spot rate, and the forward premium follow nearly non-stationary time series processes. We document these properties with an extended sample and show why they give the delusion of a puzzle. [source] Efficiency of the German electricity wholesale marketEUROPEAN TRANSACTIONS ON ELECTRICAL POWER, Issue 4 2009Christian Growitsch Abstract One of the major challenges of liberalising European electricity markets is to create competitive and efficient power trading markets. In this paper, we assess the overall efficiency of the German electricity wholesale market using cointegration analysis and error correction modelling. Applying these techniques allows us to evaluate the wholesale market efficiency in terms of price adjustments and the rapidity towards the adjustment in the price discovery and adjustment process. We show that the wholesale market seems to be inefficient and not well functioning. The inability of European Energy Exchange spot market in providing an efficient price reference to the power market suggest that the power exchange still lacks liquidity. Second, our results indicate that bilateral contracts keep the wholesale electricity prices intact with the EEX prices and also stabilise the volatility in the German wholesale market. Also, the econometric results suggest that the existence of the OTC market along with power exchange is creating a competitive effect in the wholesale market in Germany. Copyright © 2009 John Wiley & Sons, Ltd. [source] Modernizing times: UK hearing-impaired consumers at the policy crossroadsINTERNATIONAL JOURNAL OF CONSUMER STUDIES, Issue 2 2008Liz Ross Abstract Although there is now a long-standing belief in the UK that free consumer choice improves market efficiency, the supply of some consumer products and services remained controlled by the state. In the interests of consumers, it regards as vulnerable to misdirection and malpractice or unlikely to have the technical expertise to make informed decisions. Historically, the supply of hearings aids has been restricted to the National Health Service and specific licensed practitioners in the independent sector. Recent changes to both product and service provision have brought about a radical alteration to this situation, and to the framework of control. This case study of a changing healthcare system demonstrates more generally the difficulties experienced by people trying to improve or maintain auditory functions for speech communication. Access to appropriate technological solutions may be precluded by cost, distribution arrangements or lack of knowledge. Overarching these difficulties, regional health policy variations within the UK mean that consumer experiences vary according to where they live. Consumer influence over the direction and scope of changes to the hearing aid market is limited despite the rhetoric of choice. This article examines the emerging ,liberalized' market and its contradictions. [source] Euro money market interest rate dynamics and volatility: how they respond to recent changes in the operational frameworkINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2010Caroline Jardet Abstract At the beginning of 2004, the Eurosystem implemented several modifications of its operational framework and liquidity management aiming at enhancing market efficiency. The purpose of this article is to study the effects of theses changes in the spread between the Eonia and the minimum bid rate. Our results reflect that both the operational changes as well as the new liquidity management are responsible for a significant decrease in the interest rate volatility. Copyright © 2009 John Wiley & Sons, Ltd. [source] International real interest rate differentials, purchasing power parity and the behaviour of real exchange rates: the resolution of a conundrumINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 1 2004Mark P. Taylor Abstract According to one strand of the international finance literature, market efficiency implies that the real exchange rate follows a martingale process, in direct conflict with the long-run absolute purchasing power parity hypothesis, which requires a stationary real exchange rate process. This conflict between market efficiency and long-run PPP appears as something of a conundrum. We resolve this conundrum by relaxing the assumption of a constant real interest rate differential and analysing the vector equilibrium correction system linking prices and the exchange rate, and draw out the economic intuition of our result. Copyright © 2004 John Wiley & Sons, Ltd. [source] Keynesian Beauty Contest, Accounting Disclosure, and Market EfficiencyJOURNAL OF ACCOUNTING RESEARCH, Issue 4 2008PINGYANG GAO ABSTRACT This paper examines the market efficiency consequences of accounting disclosure in the context of stock markets as a Keynesian beauty contest, an influential metaphor originally proposed by Keynes [1936] and recently formalized by Allen, Morris, and Shin [2006]. In such markets, public information plays an additional commonality role, biasing stock prices away from the consensus fundamental value toward public information. Despite this bias, I demonstrate that provisions of public information always drive stock prices closer to the fundamental value. Hence, as a main source of public information, accounting disclosure enhances market efficiency, and transparency should not be compromised on grounds of the Keynesian-beauty-contest effect. [source] Market Efficiency, Bounded Rationality, and Supplemental Business Reporting DisclosuresJOURNAL OF ACCOUNTING RESEARCH, Issue 2 2001J. Richard Dietrich The AICPA Special Committee on Financial Reporting has urged disclosure of relevant forward-looking information on risks and opportunities to supplement conventional financial statements. We conduct a laboratory market experiment to assess the effects of such disclosures on capital allocation decisions. We develop two sets of competing hypotheses regarding how capital markets react to supplemental disclosures. One set is based on the assumption of semi-strong market efficiency, while the other posits that the bounded rationality of individual traders leads to inefficient market prices. We find that explicit disclosure of management's best estimate of an uncertain quantity improves market efficiency, even though this disclosure is redundant with information in financial statements. Second, we find disclosure of an upper bound of management's estimate has the potential to bias security prices upward, while informationally equivalent disclosure of both upper and lower bounds removes this bias. These results suggest that experimental market reactions to these supplemental disclosures are inconsistent with market efficiency. Supplemental analyses of individuals' price predictions and trading behavior support our conclusion that inefficiencies are at least partially attributable to individual information processing biases. [source] Evaluating Commodity Market Efficiency: Are Cointegration Tests Appropriate?JOURNAL OF AGRICULTURAL ECONOMICS, Issue 3 2002Neil Kellard This paper investigates the claim that the finding of cointegration between commodity spot and lagged futures rates reflects the existence of commodity arbitrage and not, as is generally accepted, long-run market efficiency. The methodology of Kellard et al. (1999) is employed to match spot and lagged futures rates correctly for the UK wheat futures contract traded at LIFFE. Bi-variate analysis shows that spot and lagged futures rates are cointegrated with the vector (1, -1), a necessary condition for market efficiency. However, at variance with asymptotic theory, in a tri-variate VECM estimation, the spot rate, lagged futures rate and lagged domestic interest rate are shown to be cointegrated with the vector (1, ,1, 1). The "cointegration" paradox is explained by investigating the relative magnitudes of the forecast error and the domestic interest rate. The small sample results demonstrate that it is impossible to distinguish between the influence of commodity arbitrage and the existence of market efficiency using cointegration-based tests. In summary, this work implies that such tests are not wholly appropriate for evaluating commodity market efficiency. [source] Cointegration, Efficiency and Forecasting in the Currency MarketJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 1-2 2001Wilson H. S. Tong Existing literature on using the cointegration approach to examine the efficiency of the foreign exchange market gives mixed results. Arguments typically focus on econometric testing techniques, with fractional cointegration being the most current one. This paper tries to look at the issue from an economic perspective. It shows that the cointegrating relationship, whether cointegrated or fractionally cointegrated, is found mainly among the currencies of the European Monetary System which are set to fluctuate within a given range. Hence, there is no inconsistency with the notion of market efficiency. Yet, exploiting such a cointegrating relationship is helpful in currency forecasting. There is some evidence that restricting the forecasting model to consist of only cointegrated currencies improves forecasting efficiency. [source] THE ECONOMICS OF THE UNCOVERED INTEREST PARITY CONDITION FOR EMERGING MARKETSJOURNAL OF ECONOMIC SURVEYS, Issue 1 2009C. Emre Alper Abstract Financial account liberalizations since the second half of the 1980s paved the way for the burgeoning literature that investigates foreign exchange market efficiency in emerging markets (EMs) via testing for the uncovered interest parity (UIP) condition. This paper is the first to provide a broad and critical survey on this recent literature. Specifically, we attempt to answer the following questions. First, are the EMs different from the developed economies in the context of the UIP condition? Second, to what extent can these differences contribute to the debate on the UIP literature? Third, what are the empirical challenges specific to the EMs in testing for the UIP condition? [source] How efficient is the European football betting market?JOURNAL OF FORECASTING, Issue 5 2009Evidence from arbitrage, trading strategies Abstract This paper assesses the international efficiency of the European football betting market by examining the forecastability of match outcomes on the basis of the information contained in different sets of online and fixed odds quoted by six major bookmakers. The paper also investigates the profitability of strategies based on: combined betting, simple heuristic rules, regression models and prediction encompassing. The empirical results show that combined betting across different bookmakers can lead to limited but highly profitable arbitrage opportunities. Simple trading rules and betting strategies based on forecast encompassing are found capable of also producing significant positive returns. Despite the deregulation, globalization and increased competition in the betting industry over recent years, the predictabilities and profits reported in this paper are not fully consistent with weak-form market efficiency. Copyright © 2008 John Wiley & Sons, Ltd. [source] | |||||||||||||||||||||||||||||||