This paper is concerned with empirical and theoretical basis of the Efficient Market Hypothesis (EMH). The paper begins with an overview of the statistical properties of asset returns at different frequencies (daily, weekly and monthly), and considers the evidence on return predictability, risk...

This paper studies the potential for complex asset return dynamics in a high-frequency, non-fundamental feedback trading model. Price adjustment is driven by the time-varying price impact of net orderflow. In tranquil times feedback trading has no impact on the price level. Given feedback...

We study the impact of technical analysis in a context of heterogeneous, utility-maximising agents. A framework is provided to capture observed diversity in forecast estimates as a result of interaction between prior beliefs and asymmetric information. Using investment decisions of...

This paper proposes a novel regularisation method for the estimation of large covariance matrices, which makes use of insights from the multiple testing literature. The method tests the statistical significance of individual pair-wise correlations and sets to zero those elements that are not...

This paper proposes the transformed maximum likelihood estimator for short dynamic panel data models with interactive fixed effects, and provides an extension of Hsiao et al. (2002) that allows for a multifactor error structure. This is an important extension since it retains the advantages of...

This paper extends the transformed maximum likelihood approach for estimation of dynamic panel data models by Hsiao, Pesaran, and Tahmiscioglu (2002) to the case where the errors are crosssectionally heteroskedastic. This extension is not trivial due to the incidental parameters problem that...

This paper considers testing the hypothesis that errors in a panel data model are weakly cross sectionally dependent, using the exponent of cross-sectional dependence <img src="http://www.econ.cam.ac.uk/faculty/pesaran/wp12/image3.png" width="11" height="13" />, introduced recently in Bailey, Kapetanios and Pesaran (2012). It is shown that the implicit null of the <em>CD</em> test depends on the...

This paper argues in favour of a closer link between decision and forecast evaluation problems. Although the idea of using decision theory for forecast evaluation appears early in the dynamic stochastic programming literature, and has continued to be used in meteorological forecasts, it is...

This paper provides a review of the literature on unit roots and cointegration in panels where the time dimension (T), and the cross section dimension (N) are relatively large. It distinguishes between the first generation tests developed on the assumption of the cross section independence, and...