Non-Random Walk Theory: Difference between revisions
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:'''Short Term Momentum, Including Underreaction to New Information''' | :'''Short Term Momentum, Including Underreaction to New Information''' | ||
:::Lo and MacKinley point to the presence of some "momentum" in short-run stock prices. | :::Lo and MacKinley point to the presence of some "momentum" in short-run stock prices. Momentum is a series of repeated price changes in the same direction. Lo and MacKinley also point to the under reaction to new information. This means that the stock is undervalued and that you can profit off of new information. | ||
::'''Malkiel's Response''' | |||
:::The statistical dependencies giving rise to momentum are extremely small and unlikely to provide the opportunity to achieve excess gains. | |||
Revision as of 22:05, 30 April 2007
- Economists Andrew W. Lo and A. Craig MacKinlay criticized Malkiel's Random Walk theory in their book, A Non-Random Walk Down Wall Street
Criticisms
- Short Term Momentum, Including Underreaction to New Information
- Lo and MacKinley point to the presence of some "momentum" in short-run stock prices. Momentum is a series of repeated price changes in the same direction. Lo and MacKinley also point to the under reaction to new information. This means that the stock is undervalued and that you can profit off of new information.
- Malkiel's Response
- The statistical dependencies giving rise to momentum are extremely small and unlikely to provide the opportunity to achieve excess gains.
- Malkiel's Response
