In an arbitrage-free economy with non-zero bid-ask spreads the existence of payoffs whose price is lower than the price of a dominated payoff cannot be discarded in general. However, when the former price corresponds to trivial portfolios which involve buying or selling one unit of the basis...

We propose an approach to the valuation of payoffs in general semimartingale models of financial markets where prices are nonnegative. Each asset price can hit 0; we only exclude that this ever happens simultaneously for all assets. We start from two simple, economically motivated axioms, namely...

A number of studies on the S&P 500 index options market claim that the no arbitrage assumption cannot be rejected for this market because either the martingale restriction defined in Longstaff (1995) cannot be rejected by the data, or, even when it is rejected, a large proportion of the...

Were eighteenth-century financial markets efficient? Neal (1990) shows that the London and Amsterdam markets were integrated. Yet some scholars find that the London capital market was either not integrated across various classes of securities, or was comprised of ignorant investors who were not...

I use five separate measures of deviation from Put-Call Parity of options on a stock without splits or dividends as separate negative measures for market efficiency. I rely upon the theory of trading volume as a function of short sales costs, etc., and that of market efficiency as a function of...

Market efficiency and the pricing kernel are closely related. A non-monotonic decreasing pricing kernel implies the existence of a trading strategy in contingent claims that stochastically dominates a direct investment in the market. Moreover, a market is assumed to be efficient only if no...

This paper provides some new empirical evidence on the weekend effect, one of the most recognized anomalies in financial markets. Two different methods are used: (i) a trading robot approach to examine whether or not there is such an anomaly giving rise to exploitable profit opportunities by...

This paper provides some new empirical evidence on the weekend effect, one of the most recognized anomalies in financial markets. Two different methods are used: (i) a trading robot approach to examine whether or not there is such an anomaly giving rise to exploitable profit opportunities by...

One of the leading criticisms of the Efficient Market Hypothesis (EMH) is the presence of so-called "anomalies", i.e. empirical evidence of abnormal behaviour of asset prices which is inconsistent with market efficiency. However, most studies do not take into account transaction costs. Their...

One of the leading criticisms of the Efficient Market Hypothesis (EMH) is the presence of so-called “anomalies”, i.e. empirical evidence of abnormal behaviour of asset prices which is inconsistent with market efficiency. However, most studies do not take into account transaction costs. Their...