What is it about?
Finance theory contends that it should not be possible to predict (or partly-predict) stock market prices, however data often discloses traces of predictability. We show that one source of predictability is non-synchronous trading - meaning that some stocks take more time to trade (because they are less liquid) and therefore there may be a delay in terms of their prices adjusting to news.
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Why is it important?
The findings are important because they draw our attention that predictability in stock market data does not necessarily contradict traditional theories, such as the Efficient Markets Hypothesis.
Perspectives
This paper is noteworthy because it proposes a simple test to infer whether predictability (patterns) in stock market data are a result of differing liquidity levels across stocks (non-synchronous trading).
Dr Silvio John Camilleri
University of Malta
Read the Original
This page is a summary of: Stock market predictability, Studies in Economics and Finance, September 2014, Emerald,
DOI: 10.1108/sef-06-2012-0070.
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