scholarly journals Economically irrational pricing of nineteenth-century British government bonds

2016 ◽  
Vol 23 (3) ◽  
pp. 277-302 ◽  
Author(s):  
Andrew Odlyzko
Keyword(s):  
Nineteenth Century ◽  
Interest Rate ◽  
Financial Market ◽  
Anomalous Behavior ◽  
Law Of One Price ◽  
Efficient Markets ◽  
British Government ◽  
Government Bonds ◽  
Modern Economy ◽  
Efficient Markets Hypothesis

British government bonds formed the deepest, most liquid and most transparent financial market of the nineteenth century. This article shows that those bonds had long periods, extending over decades, of anomalous behavior, in which Consols, the largest and best known of these instruments, were noticeably overpriced relative to equivalent securities which offered the same interest rate and the same guarantee of payment. This finding and similar ones for other comparable pairs of British gilts appear to provide the most extreme counterexamples documented so far to the Efficient Markets Hypothesis and to the Law of One Price, and point the way to further investigations on the origins and nature of the modern economy.

scholarly journals Decision-making under Market Indeterminacy

2021 ◽  
Vol 5 (2) ◽  
pp. 22
Author(s):  
Shi Yun
Keyword(s):  
Financial Market ◽  
Stock Prices ◽  
Imperfect Information ◽  
Empirical Studies ◽  
Price Formation ◽  
Efficient Markets ◽  
Research And Practice ◽  
The Past ◽  
Efficient Markets Hypothesis ◽  
Abnormal Profits

The Efficient Markets Hypothesis (EMH) is the focusing topic in the past 50 years of financial market researches. Many empirical studies are then provided that want to test EMH but have no consensus. The perception of EMH determines the attitude and strategy of participants and regulators in financial market. One perception of EMH argues that investors’ behavior of seeking abnormal profits and arbitrage drives prices to their ‘‘correct’’ value. Investigating the “correct” value derives the concept of “market indeterminacy”. It means the inability to determine whether stock prices are efficient or inefficient. Market indeterminacy pervades stock markets because “correct” prices are unknown because of imperfect information and model sensitivity. Market indeterminacy makes arbitrage risky and makes event studies unreliable in some policy and litigation applications. The concept of market efficiency is needed to be re-recognized considering the mechanism of price formation. In order to further research and practice in law and financial market, there needs a view from the “jumping together” of disparate disciplines. Adaptive Markets Hypothesis(AMH) that using the evolutionary principles in financial market is a new viewpoint oncognitive decision and deserves to be paid more attention to.

The nineteenth-century US whaling industry: Where is the risk premium? New materials facilitate updated view

2021 ◽  
Vol 33 (2) ◽  
pp. 344-363
Author(s):  
Barbara L. Coffey
Keyword(s):  
Nineteenth Century ◽  
Risk Premium ◽  
Financial Returns ◽  
New Materials ◽  
Government Bonds ◽  
Us Government ◽  
Whaling Industry ◽  
The Mean ◽  
Printed Materials

Materials that were born digital, and printed materials that have been digitized, have aided an updated examination of nineteenth-century US whaling voyages’ financial returns. Items included the American Offshore Whaling Voyages dataset from whalinghistory.org , The Whalemen’s Shipping List and Merchant’s Transcript, a congressman’s speech and a state’s census reports. These works and others, with analysis, showed that for the 11,257 analysable voyages ending in the 1800s, the mean return was 4.7% and 4.6% for whaling and US government bonds, respectively. Ideally, this work will place the nineteenth-century US whaling industry returns in context of other investments.

A Note Concerning the Dynamics of Government Bond Yields

2021 ◽  
pp. 056943452098827
Author(s):  
Tanweer Akram
Keyword(s):  
Interest Rate ◽  
Financial Markets ◽  
Yield Curve ◽  
Empirical Studies ◽  
State Theory ◽  
Government Bond ◽  
Bond Yields ◽  
Short Term ◽  
Government Bonds

Keynes argued that the central bank can influence the long-term interest rate on government bonds and the shape of the yield curve mainly through the short-term interest rate. Several recent empirical studies that examine the dynamics of government bond yields not only substantiate Keynes’s view that the long-term interest rate responds markedly to the short-term interest rate but also have relevance for macroeconomic theory and policy. This article relates Keynes’s discussions of money, the state theory of money, financial markets, investors’ expectations, uncertainty, and liquidity preference to the dynamics of government bond yields for countries with monetary sovereignty. Investors’ psychology, herding behavior in financial markets, and uncertainty about the future reinforce the effects of the short-term interest rate and the central bank’s monetary policy actions on the long-term interest rate. JEL classifications: E12; E40; E43; E50; E58; E60; F30; G10; G12; H62; H63

scholarly journals Novel market inefficiencies from early Victorian times

2017 ◽  
Vol 24 (2) ◽  
pp. 143-165 ◽  
Author(s):  
Andrew Odlyzko
Keyword(s):  
Nineteenth Century ◽  
Economic Incentives ◽  
Bond Market ◽  
Government Bond ◽  
British Government ◽  
Victorian Culture ◽  
Market Inefficiencies ◽  
Corporate Capitalism ◽  
The Government ◽  
Pricing Anomaly

A previously unknown pricing anomaly existed for a few years in the late 1840s in the British government bond market, in which the larger and more liquid of two very large bonds was underpriced. None of the published mechanisms explains this phenomenon. It may be related to another pricing anomaly that existed for much of the nineteenth century in which terminable annuities were significantly underpriced relative to so-called ‘perpetual’ annuities that dominated the government bond market. The reasons for these mispricings seem to lie in the early Victorian culture, since the basic economic incentives as well as laws and institutions were essentially the familiar modern ones. This provides new perspectives on the origins and nature of modern corporate capitalism.

scholarly journals Liquidity Choice and Misallocation of Credit

2019 ◽  
Vol 2019 (284) ◽  
Author(s):  
Ehsan Ebrahimy
Keyword(s):  
Interest Rate ◽  
Type I ◽  
Pareto Improvement ◽  
Government Bonds ◽  
High Interest Rate ◽  
Liquid Asset ◽  
Constrained Efficiency ◽  
Liquid Type ◽  
The Interest Rate

This paper studies a novel type of misallocation of credit between investments of varying liquidity. One type of investment is more liquid, i.e., its return is more pledgeable, and the other is more productive. Low liquidities of both investment types imply that the allocation of credit is constrained inefficient and that there is overinvestment in the liquid type. Constrained inefficient equilibria feature non-positive, i.e., one less than or equal the economy’s growth rate, and yet too high interest rate, too much investment and too little consumption. Financial development can reduce long-term welfare and output in a constrained inefficient equilibrium if it raises the liquidity of the liquid type. I show a maximum liquid asset ratio or a simple debt tax can achieve constrained efficiency. Introducing government bonds can make Pareto improvement whenever it does not raise the interest rate.

scholarly journals Sorismo en el contexto del geunismo

2012 ◽  
Author(s):  
Alejandro Sánchez-Seco López
Keyword(s):  
Great Recession ◽  
Body Politic ◽  
The Body ◽  
The Political ◽  
Efficient Markets ◽  
Efficient Markets Hypothesis ◽  
Economic Philosophy ◽  
The One ◽  
Regulatory Proposals ◽  
Economic Globalisation

En el contexto de una obra mucho más amplia y en ciernes, que propone como único sistema plenamente legítimo aquél cuyo cuerpo político viene constituido por la totalidad de habitantes del planeta, es conveniente traer a colación la filosofía política y económica de George Soros, porque aporta una visión muy diferente a la aplicada por los endiosados economistas que no supieron ver con antelación la Gran Recesión global en la que seguimos inmersos. La relación entre la realidad y el pensamiento es clave en el sorismo, como también lo es la distinción entre los diversos tipos de ciencias. La hipótesis de la eficiencia en los mercados también es cuestionada, junto con el concepto de equilibrio en economía, la incertidumbre y la falibilidad. También se acomete la crítica del fundamentalismo de mercado y a las propuestas regulatorias. Y todo en el contexto de una globalización económica poco política.Within the context of a much wider and developing piece proposing as only fully legitimate system the one the body politic of which is composed of the totality of inhabitants on the planet, it is convenient to bring to us the political and economic philosophy of George Soros for it adds a very different vision to that applied by the deified economists who could not in advance see the global Great Recession in which we keep on living. The relation between reality and thought is key within Sorism, as it is the distinction amongst the several kinds of sciences. The Efficient Markets Hypothesis is also put into question side by side with the concept of equilibrium in Economics, uncertainty, and fallibility. The critique of market fundamentalism is also implemented as well as the regulatory proposals. And all of it taking place within the context of a scarcely political but very economic globalisation.

scholarly journals FRACTAL MARKETS HYPOTHESIS AND THE GLOBAL FINANCIAL CRISIS: SCALING, INVESTMENT HORIZONS AND LIQUIDITY

2012 ◽  
Vol 15 (06) ◽  
pp. 1250065 ◽  
Author(s):  
LADISLAV KRISTOUFEK
Keyword(s):  
Financial Crisis ◽  
Complex Systems ◽  
Financial Markets ◽  
Global Financial Crisis ◽  
Efficient Markets ◽  
Investment Horizon ◽  
Heterogenous Agents ◽  
Efficient Markets Hypothesis ◽  
The Global Financial Crisis ◽  
Underlying Processes

We investigate whether the fractal markets hypothesis and its focus on liquidity and investment horizons give reasonable predictions about the dynamics of the financial markets during turbulences such as the Global Financial Crisis of late 2000s. Compared to the mainstream efficient markets hypothesis, the fractal markets hypothesis considers the financial markets as complex systems consisting of many heterogenous agents, which are distinguishable mainly with respect to their investment horizon. In the paper, several novel measures of trading activity at different investment horizons are introduced through the scaling of variance of the underlying processes. On the three most liquid US indices — DJI, NASDAQ and S&P500 — we show that the predictions of the fractal markets hypothesis actually fit the observed behavior adequately.

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