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somedevil
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Funniest argument against EMH!

February 14th, 2009, 8:46 pm

OK, this is funny...now I am reading one paper by 2 Professors(working in Philadelphis edu and SEC - P.Russel and V.Torbey), it's very interesting and serious study about EMH - is it right or wrong...but this cracked me up:"Saunders (1993) shows that the New York Stock Exchange index tends to be negative when it is cloudy. More recently, Hirshleifer andShumway (2001) analyze data for 26 countries from 1982-1997 and find that stock market returnsare positively correlated with sunshine in almost all of the countries studied. Interestingly, they findthat snow and rain have no predictive power!"So here is a new trading strategy - BUY in bulk when the sun in New York is shining and SELL when a cloud approaches.
 
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Paul
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Funniest argument against EMH!

February 15th, 2009, 10:24 am

This is well known. Which part of the chain of cause and effect is a problem? The weather affects humans, humans move the stock market. Personally I find it hilarious when people try to defend EMH against common sense!If it is indeed a statistical arbitrage then a) cause and effect are obvious orb) maybe it is self fulfilling orc) if not self fulfilling then it only continues to exist because people find it funny and don't take it seriously.In view of (c) please let me retract everything above and say, Haha! How silly you would be to try to exploit it! (Leaving me to be the only person to trade it!)P
 
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Martinghoul
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Funniest argument against EMH!

February 15th, 2009, 12:06 pm

This is a very well-know behavioral finance result... There's also one about lunar cycles having a non-negligible effect on returns. My favorite, however, has to be the MCI-MCIC (Massively Confused Investors Making Conspicuously Ignorant Choices) paper. Also Odean papers (like 'Boys will be boys') are quite entertaining.Before you start offering investors super fantastic returns on these strategies, somedevil, I have to disappoint you. The abnormal returns shown by these event studies are not large enough to cover transaction costs, in most cases.
Last edited by Martinghoul on February 14th, 2009, 11:00 pm, edited 1 time in total.
 
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Anthis
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Funniest argument against EMH!

February 15th, 2009, 12:18 pm

I think the findings of this study should be taken more seriously from regulators and other stakeholders and move all stock exchanges to locations in sunbelt. Umbrellas and raincoats arent the appropriate accesories for sophisticated investors.
 
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Traden4Alpha
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Funniest argument against EMH!

February 15th, 2009, 1:16 pm

QuoteOriginally posted by: PaulThis is well known. Which part of the chain of cause and effect is a problem? The weather affects humans, humans move the stock market. And the next leg in that chain of causalities is that a rise in the stock market rise makes it sunnier! This is not as crazy as it sounds because rising equities imply rising economic activity which implies rising CO2 emissions, global warming and all that (Anthis gets his wish for sunbelt bourses by shifting the sunbelt to Northern Europe). The flipside is that we can combat global warming by shorting equities.
 
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somedevil
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Funniest argument against EMH!

February 15th, 2009, 5:36 pm

QuoteOriginally posted by: MartinghoulThis is a very well-know behavioral finance result... There's also one about lunar cycles having a non-negligible effect on returns. My favorite, however, has to be the MCI-MCIC (Massively Confused Investors Making Conspicuously Ignorant Choices) paper. Also Odean papers (like 'Boys will be boys') are quite entertaining.Before you start offering investors super fantastic returns on these strategies, somedevil, I have to disappoint you. The abnormal returns shown by these event studies are not large enough to cover transaction costs, in most cases.Martinghoul,Somehow I have heard of the transaction costs...No offense, but please don't waste my time here, as you and daveangel love to do . I just find it quite funny when I post some regular topic...with usually funny context and you(daveangel) and perhaps some 1-2 others(rmax come here with arguments against me. AND when I post something like this: http://www.wilmott.com/messageview.cfm? ... adid=68692 - then all I see is: "views - 100" - replies: "0".Funny, isn't it?
 
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Collector
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Funniest argument against EMH!

February 15th, 2009, 5:53 pm

we should be careful with correlation and causality"...we conclude that economic activity has an important influence on the sun. Thus, Jevons's argument that a relationship exists between sunspots and economic activity was right but for the wrong reason. "Sheehan, R. G. and Grieves, R. (1982): "Sunspots and Cycles: A Test of Causation", Southern Economic Journal, Vol. 48. No. 3, pp 775-777In medicine in particular I noticed how correlation studies are abused all the time, correlation over short period of time do not necessary mean causality.
Last edited by Collector on February 14th, 2009, 11:00 pm, edited 1 time in total.
 
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somedevil
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Funniest argument against EMH!

February 15th, 2009, 5:55 pm

QuoteOriginally posted by: PaulThis is well known. Which part of the chain of cause and effect is a problem? The weather affects humans, humans move the stock market. Personally I find it hilarious when people try to defend EMH against common sense!If it is indeed a statistical arbitrage then a) cause and effect are obvious orb) maybe it is self fulfilling orc) if not self fulfilling then it only continues to exist because people find it funny and don't take it seriously.In view of (c) please let me retract everything above and say, Haha! How silly you would be to try to exploit it! (Leaving me to be the only person to trade it!)PBy the way, since you are a physicist as well, Paul, you'd probably find this interesting: volta.byu.edu/BellGraphics.pdfI am sure it's nothing new to you...but...I am just trying to figure out if there is such thing as "randomness" at all, and since it's the weeken - I am looking forward to a study without formular/codes addressing the issue.
 
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NattieLight
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Funniest argument against EMH!

February 16th, 2009, 12:42 am

Finally, a reason to use weather derivatives.
 
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tw
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Funniest argument against EMH!

February 16th, 2009, 3:34 pm

I'm not going to defend EMH but why is this funny?There are many energy markets that are very highly correlated to weather in various forms. Isn't the efficiency or otherwise related to how the markets react to changes in weather information?QuoteOriginally posted by: somedevilOK, this is funny...now I am reading one paper by 2 Professors(working in Philadelphis edu and SEC - P.Russel and V.Torbey), it's very interesting and serious study about EMH - is it right or wrong...but this cracked me up:"Saunders (1993) shows that the New York Stock Exchange index tends to be negative when it is cloudy. More recently, Hirshleifer andShumway (2001) analyze data for 26 countries from 1982-1997 and find that stock market returnsare positively correlated with sunshine in almost all of the countries studied. Interestingly, they findthat snow and rain have no predictive power!"So here is a new trading strategy - BUY in bulk when the sun in New York is shining and SELL when a cloud approaches.
 
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gc
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Funniest argument against EMH!

February 16th, 2009, 3:41 pm

QuoteNo offense, but please don't waste my time here, as you and daveangel love to do . Is there anything that I'm missing here? I cannot see anything wrong in Martinghoul's reply, why such an angry reply.BTW, while I don't find anything funny in the original argument, I find something sad in the tension I can feel here...gc
 
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hamster
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Funniest argument against EMH!

February 17th, 2009, 9:12 pm

QuoteOriginally posted by: AnthisI think the findings of this study should be taken more seriously from regulators and other stakeholders and move all stock exchanges to locations in sunbelt. Umbrellas and raincoats arent the appropriate accesories for sophisticated investors. during down turns financial regulators should oblige traders to vistit a solarium in the morning
 
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mathematalef0
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Funniest argument against EMH!

February 18th, 2009, 12:41 pm

Maybe mediterranean places is the answer!
 
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trackstar
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Funniest argument against EMH!

February 18th, 2009, 12:53 pm

QuoteOriginally posted by: hamsterQuoteOriginally posted by: AnthisI think the findings of this study should be taken more seriously from regulators and other stakeholders and move all stock exchanges to locations in sunbelt. Umbrellas and raincoats arent the appropriate accesories for sophisticated investors. during down turns financial regulators should oblige traders to vistit a solarium in the morning If you must be in a colder climate, dry saunas in the afternoons are very good.With a little water to throw on the stones from time to time.
Last edited by trackstar on February 17th, 2009, 11:00 pm, edited 1 time in total.