Optimizing a basket against the efficient market hypothesis

Details Optimizing a basket against the efficient market hypothesis Optimizing a basket against the efficient market hypothesis

2010-06-27

arxiv.org/abs/1006.5230v1

Economy

Quantitative Finance

Trading and Market Microstructure

submitted to Quantitative Finance

Scientific paper

The possibility that the collective dynamics of a set of stocks could lead to a specific basket violating the efficient market hypothesis is investigated. Precisely, we show that it is systematically possible to form a basket with a non-trivial autocorrelation structure when the examined time scales are at the order of tens of seconds. Moreover, we show that this situation is persistent enough to allow some kind of forecasting.

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