Event title

Finance Cluster Seminar: Professor Peter Bossaerts

The Efficient Markets Hypothesis Does Not Hold When Securities Valuation is Computationally Hard
Presenter: 
Professor Peter Bossaerts
Presenter bio: 

For more information about this presenter, please see The University of Melbourne staff profile.

Event Content:
We study the Efficient Markets Hypothesis (EMH) in a setting where information heterogeneity emerges because securities valuation requires solving an NP-hard problem. We demonstrate experimentally that the quality of prices deteriorates substantially as computational complexity increases. Participants whose valuations are closer to true values earn more from trading. Participants improved their individual valuations by learning from market data, and their individual valuations on average were better than those reflected in market prices. These results are in sharp contrast with findings in experiments where correct valuation requires averaging of private information. They suggest that EMH only holds in very specific circumstances.

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For enquiries or to register for this event please contact Albert Chun.

Friday 19 May 2017
10:30am to 12:00pm
Event location: 
Joyce Ackroyd (37), Room 430