[PDF] Have Financial Markets Become More Informative eBook
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The finance industry has grown, financial markets have become more liquid, information technology has been revolutionized. But have financial market prices become more informative? We derive a welfare-based measure of price informativeness: the predicted variation of future cash flows from current market prices. Since 1960, price informativeness has increased at longer horizons (three to five years). The increase is concentrated among firms with greater institutional ownership and share turnover, firms with options trading, and growth firms. Prices have also become a stronger predictor of investment, and investment a stronger predictor of cash flows. These results suggest increased revelatory price efficiency.
The finance industry has grown, financial markets have become more liquid, and information technology allows arbitrageurs to trade faster than ever. But have market prices then become more informative? We use stock and bond prices to forecast earnings and find that the information content of market prices has not improved since 1960. We use a model with information acquisition and investment to link financial development, price informativeness, and allocational efficiency. As information costs fall, the predictable component of future earnings should rise and hence improve capital allocation and welfare. We find that this component has remained stable over the past 50 years. When we decompose price informativeness into real price efficiency and forecasting price efficiency, we find that both have remained stable.
The finance industry has grown, financial markets have become more liquid, and information technology allows arbitrageurs to trade faster than ever. But have market prices then become more informative? We use stock and bond prices to forecast earnings and find that the information content of market prices has not improved since 1960. We use a model with information acquisition and investment to link financial development, price informativeness, and allocational efficiency. As information costs fall, the predictable component of future earnings should rise and hence improve capital allocation and welfare. We find that this component has remained stable over the past 50 years. When we decompose price informativeness into real price efficiency and forecasting price efficiency, we find that both have remained stable.
The revised and updated 7th edition of this highly regarded book brings the reader right up to speed with the latest financial market developments, and provides a clear and incisive guide to a complex world that even those who work in it often find hard to understand. In chapters on the markets that deal with money, foreign exchange, equities, bonds, commodities, financial futures, options and other derivatives, the book examines why these markets exist, how they work, and who trades in them, and gives a run-down of the factors that affect prices and rates. Business history is littered with disasters that occurred because people involved their firms with financial instruments they didn't properly understand. If they had had this book they might have avoided their mistakes. For anyone wishing to understand financial markets, there is no better guide.
The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.
John J. Murphy has updated his landmark bestseller Technical Analysis of the Futures Markets, to include all of the financial markets. This outstanding reference has already taught thousands of traders the concepts of technical analysis and their application in the futures and stock markets. Covering the latest developments in computer technology, technical tools, and indicators, the second edition features new material on candlestick charting, intermarket relationships, stocks and stock rotation, plus state-of-the-art examples and figures. From how to read charts to understanding indicators and the crucial role technical analysis plays in investing, readers gain a thorough and accessible overview of the field of technical analysis, with a special emphasis on futures markets. Revised and expanded for the demands of today's financial world, this book is essential reading for anyone interested in tracking and analyzing market behavior.
An informative guide to market microstructure and trading strategies Over the last decade, the financial landscape has undergone a significant transformation, shaped by the forces of technology, globalization, and market innovations to name a few. In order to operate effectively in today's markets, you need more than just the motivation to succeed, you need a firm understanding of how modern financial markets work and what professional trading is really about. Dr. Anatoly Schmidt, who has worked in the financial industry since 1997, and teaches in the Financial Engineering program of Stevens Institute of Technology, puts these topics in perspective with his new book. Divided into three comprehensive parts, this reliable resource offers a balance between the theoretical aspects of market microstructure and trading strategies that may be more relevant for practitioners. Along the way, it skillfully provides an informative overview of modern financial markets as well as an engaging assessment of the methods used in deriving and back-testing trading strategies. Details the modern financial markets for equities, foreign exchange, and fixed income Addresses the basics of market dynamics, including statistical distributions and volatility of returns Offers a summary of approaches used in technical analysis and statistical arbitrage as well as a more detailed description of trading performance criteria and back-testing strategies Includes two appendices that support the main material in the book If you're unprepared to enter today's markets you will underperform. But with Financial Markets and Trading as your guide, you'll quickly discover what it takes to make it in this competitive field.
This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.
Forecasting returns is as important as forecasting volatility in multiple areas of finance. This topic, essential to practitioners, is also studied by academics. In this new book, Dr Stephen Satchell brings together a collection of leading thinkers and practitioners from around the world who address this complex problem using the latest quantitative techniques. *Forecasting expected returns is an essential aspect of finance and highly technical *The first collection of papers to present new and developing techniques *International authors present both academic and practitioner perspectives