Econs: Efficient Markets Theory

Efficient markets theory/ Efficient Markets Hypothesis

Developed by Eugene Fama – states that it is impossible to beat the market since the prices already reflect and incorporate all relevant information.

Theory that all market participants receive and act on all of the relevant information as soon as it becomes available. That means that whatever information is available about a stock to one investor is also available to all investors. Since everyone has the same information about a stock, the price of a stock should reflect the knowledge and expectations of all investors.

Bottom line is that an investor should not be able to beat the market since there is no way for him to know something about the stock that isn’t already reflected in the stock’s price.

http://www.investorwords.com/1672/Efficient_Market_Theory.html

http://www.investopedia.com/university/concepts/concepts6.asp

Article: What can replace the efficient market theory? By Jonathan Davis

The Financial Times 13 July 2009

“The most interesting thing about the efficient markets theory is not whether it is valid or not – clearly it is not – but how it has managed to remain so influential for so long”

“Behavioural finance has grown to become a popular alternative approach precisely because it does appear to explain more clearly how investors individually and collectively, appear to act."

Economics trying to imitate the sciences –particularly physics.Professor Andrew Lo of MIT – mere case of “physics envy”. Nobel Laureate Paul Samuelson developed a set of fundamental laws in an attempt to do for economics what Newton’s laws of thermodynamics did for physics.

• Utility Theory : Economics concept that although it is impossible to measure the utility derived from a good or service, it is usually possible to rank the alternatives in their order of preference to the consumer. Since this choice is constrained by the price and the income of the consumer, the rational consumer will not spend money on an additional unit of good or service unless its marginal utility is at least equal to or greater than that of a unit of another good or service. Therefore, the price of a good or service is related to its marginal utility and the consumer will rank his or preferences accordingly

• Equilibrium: State of stable conditions in which all significant factors remain more or less constant over a period, and there is little or no inherent tendency for change.
• Principle of no arbitrage: Prices cannot allow for risk free net profits. Underlying assumption that markets eliminate any opportunity for risk-free profits.
• Efficient markets hypothesis and notion that stock prices follow a random walk are offshoots of this approach. Problem is that the financial markets don’t lend themselves well to deductive theory.

Prof Lo:

“Economic systems involve human interactions which almost by definition are more complex than interactions of inanimate objects governed by fixed and known laws of motion”

Prof Lo’s response has been to develop an “adaptive markets hypothesis which seeks to draw on the insights of neuroscience and evolutionary biology”. The aim is to create a framework which relates the behavior of financial markets to a number of different factors, including the emotional condition of the market participants at different points in time and the current balance of advantage between competing groups of market participants. Believes that what is at work in the financial markets is a Darwinian process of “survival of the richest”.

Implications of this approach:-

• Relationship between risk and return will not be stable over time
• Rather than markets becoming steadily more efficient, this world is one in which new profit opportunities will continue to emerge at a constant rate.
• Does not give investors (unlike the efficient markets theory) a simple metric for understanding what to do.

BUT it does appear to relate to the complex/mutable world we live in which the efficient markets hypothesis does not do.

Collective nouns

Collective nouns/nouns of assemblage:

A gaggle of geese
A colony of ants
A shrewdness of apes
A pace/herd of donkeys
A troop/congress of baboons
A culture of bacteria
A cete of badgers
A shoal of bass
A colony of bats
A sleuth/sloth of bears
A colony of beavers
A swarm/hive/grist of bees
A flock/flight/volery/congregation of birds
A sounder of boars
A brace/clash of bucks
A herd or obstinacy of buffalos
A wake of buzzards
A flock of camels
A clutter/clowder/nuisance of cats
An army of caterpillars
A herd/drove of cattle
A brood/peep of chicken
A clutch or chattering of chicks
A bed of clams
An intrusion of cockroaches
A quiver of cobras
A rag of colts
A kine of cows
A band of coyotes
A sedge/siege of cranes
A float of crocodiles
A murder of crows
A litter of cubs
A cowardice of curs
A herd of curlews
A herd of deer
A pack of dogs
A dule or piteousness or cote of doves
A weyr or flight of dragons
A brace/paddling/team of ducks
A herd of elephants
A gang of elk
A mob of emus
A cast of falcons
A business/cast/fesnyng of ferrets
A charm of finches
A shoal/school/run/catch/haul of fish
A swarm or a business of flies
A skulk/leash of foxes
An army of frogs
A flock/gaggle or skein(in flight) of geese
A tower of giraffes
A cloud or horde of gnats
An implausibility of gnu
A herd/tribe/trip of goats
A charm of goldfinches
A troubling or glint of goldfish
A colony of gulls
A band of gorillas
A leash of greyhound
A covey of grouse
A down/husk of hare
A cast or kettle or aerie of hawks
A brood of hens
A hedge or sedge of heron
A bloat of hippopotamus
A drift or parcel of hog
A team/pair/harras of horses
A pack/mute or cry of hounds
A smack of jellyfish
A kindle or litter of kittens
An exultation or ascension of larks
A leap of leopards
A pride of lions
A plague of locusts
A tiding/gulp/murder/charm of magpies
A sord of mallard
A stud of mares
A richness of martens
A mischief of mice
A labour of moles
A troop of monkeys
A barren or span of mules
A romp of otters
A parliament of owls
A yoke/drove/team of oxen
A bed of oysters
A company of parrots
A covey of partridge
A muster/ostentation or pride of peacocks
A litter of peep
A parcel/huddle/colonies of penguins
A nest/nide/bouquet of pheasants
A litter of pigs
A flock or flight of pigeons
A string of ponies
A pod of porpoises
A covey/bevy of quail
A nest of rabbits
A pack or swarm of rats
A rhumba of rattlesnakes
An unkindness or storytelling of ravens
A crash or herd of rhino
A bevy of roebuck
A clamour/building of ravens
A family of sardines
A herd/pod of seal
A drove/flock of sheep
A nest of snakes
A host of sparrows
A dray or scurry of squirrels
A murmuration of starlings
A muster or mustering of storks
A flight of sparrows
A bevy/herd/lamentation/wedge of swans
A flock of swifts
A bale of turtles
A sounder or drift of swine
A swift or ambush of tigers
A knot of toads
A hover of trout
A rafter of turkeys
A pitying or dule of turtledoves
A nest of vipers
A pod of walrus
A school/gam/pod of whales
A pack/route of wolves
A descent of woodpeckers
A herd/zeal/dazzle of zebras
A shiver of shark
A warren of wombats
A labour of moles
A clan of hyenas
A band/ scold/party of jays
A deceit of lapwings
A watch of nightingales
A gaze or nursery of raccoons
A clamour/building of rooks
A wisp/walk of snipes
A sneak of weasles
A prickle of hedgehogs
A fall of woodcocks
A convocation of eagles

Modernism

Movement that started and developed during the late 19th to early 20th century during a period in European history that was marked by transformation, innovation, upheaval, technological development and war. This was a period and a movement marked by the questioning of the axioms of earlier ages. Modernism in general refers to the activities and output of those who thought that the “traditional” forms of art, architecture, literature, religion, social organization and daily life were insufficient to the task of encapsulating the new economic, social and political conditions of the emerging industrialized society.

The art, culture and writing of that era largely refracted or reflected these tensions, capturing a sensibility of change, transition and a rising sense of crisis.

The ideology of modernism was to go against some aspect of tradition or status quo. Modernist writers wanted to break with the past, rejecting literary traditions that seemed outmoded and diction that seemed to be out of touch with the era of technological breakthroughs and war. Many modernist poets/writers wrestled with the fundamental question of “self”, often trying to show the feeling of fragmentation and alienation from the world; in modernist writing, a coherent speaker with a clear sense of self is correspondingly hard to find. Modernist writing is also often viewed as a backlash against the Victorian style of poetry and writing which was marked by traditional formalism and ornate diction. Modernists saw themselves as looking back to the best of the poetry of the past as well as the poetry and writing of different cultures.

Quote from Peter Childs: "There were paradoxical if not opposed trends towards revolutionary and reactionary positions, fear of the new and delight at the disappearance of the old, nihilism and fanatical enthusiasm, creativity and despair.”

Radical artistic experimentation abounded during this era, perhaps as a reaction or reflection of the age of global war. Literary modernism has continued to shape a sense of art as a form of cultural revolution that must break with established history, constantly pushing out the boundaries of artistic practice.

In art, it was an era of high aesthetic self consciousness and non-representationalism, in which art turned from realism and humanistic representation toward style, technique and spatial form in pursuit of a deeper penetration of life. An order in art that was independent of, transcending the humanistic, the material, the real – art that made life, the artist’s consciousness, internal drama, the structure that lies beyond time, history, character or visible reality, the moral imperative of technique.

There was a movement toward sophistication and mannerism, towards introversion, technical display and internal self-scepticism. The experimentalism of the modernist age was not just of sophistication and novelty, it was also of bleakness, darkness, alienation and disintegration.

Backdrop

The late 1800s and early 1900s saw huge socio-cultural changes such as the rise of industrialism, the rise of cities and urban life, technological advancements in transportation, architecture and engineering, a rising population that engendered crowds and chaos in public spaces, a growing sense of mass markets which downplayed the individual “self” and left people feeling alienated, fragmented and at a loss in their daily worlds.

This tension and unease intensified during and after WWI which had contributed to the general collapse and decay of the social/moral order. In England, in particular, modernist writing was a distinct breakaway from the poetry/writing of the golden years of the Victorian era, reflecting an England that was bleaker, weakened by WWI and much less secure with its place in the world.
The pop culture of the early 20th century also left its mark on modernist writing – in many novels of that era, speakeasies, jazz music and bars were featured. The role of women changed as many took up jobs left behind by men during the war and this was reflected not only in the changing fashions of the era but also in the increasingly non traditional roles played by women in novels.

The modern movement in art transformed artistic form, thought and consciousness just as the scientific, technological, philosophical and political innovations transformed the speed, the nature and the very experience of human life.

The philosophy of times also questioned the entrenched social and religious orders. Marx, Freud and Engels, Nietszche lived and wrote during this time – questioning not only the established political order but also pushing the boundaries of established philosophical and religious thought. They altered the established understanding of the mind and of human identity and undermined traditional notions of truth, certainty and morality.

Influence

The modernist era had enormous influence on the art, culture and poetry of the post-modern age. It remained integrally woven into contemporary awareness, possessing the power to startle, renew and disturb. The innovative thinkers, writers , artists and experiments of the modernist era enlarged our understanding of the world, and the innovations that seemed outrageous, mad or impossible has now entered into our cultural lexicon, ironically becoming part of the canon in painting, architecture, music, film and writing, despite the fact that as a movement, it had questioned and attempted to overthrow the canonical and traditional.

But the modernist ideals of revision, reinterpretation, questioning of tradition and order in art, social organization, philosophy continue to frame and influence the mores and thought of society today. In particular, post modernist thought and culture grew out of the shadow of the modernist movement and a good understanding of postmodern thought very often prompts and demands the study of modernist thought and culture as a backdrop.

Characteristics of Modernist Poetry/Writing: (incomplete)

- Experimental poetry – do not follow traditional schemes, organised in a ways which the poet feels it should be (big spaces, line breaks, words scrunched together). Breaks the rules of grammar. Sense of non linearity and disjointedness.
- Anti realism – avoiding traditional topics, not usually describing actual occurrences
- Individualist: striving for their own style or subjects of poetry, breaking the norm.
- Thoughtful and philosophical – not mainly focused on emotions but reasoning around ideas or the poet’s inner thoughts.
- Extensive use of free verse
- Move away from the Romantic idea of a poetic “self” addressing an ideal reader/audience.
- Self consciousness
- Imagism
- Dada art

Poets/writers (incomplete list):
- e e cummings
- TS Eliot – The Waste Land, Journey of the Magi, The Lovesong of Alfred J Prufrock
- Virginia Woolf: Mrs Dalloway, To the Lighthouse
- Hilda Doolittle (HD)
- William Carlos Williams (Imagist)
- Mina Loy
- (lesser known) Dorothy Parker
- Ezra Pound
- Walt Whitman
- Hemingway

Anton Piller Order / Search Order (Order 29)

Anton Piller Order - order that provides the right to search the premises and seize evidence. This is to prevent the destruction of incriminating evidence.

1. Standard Form 8 from The Supreme Court Practice Directions
2. Application for Search Order is made by way of Ex-Parte Summons, Applicant may be required to support his cross-undertaking in damages by a payment into court. Full and frank disclosure of all material facts is required.
3. Judge has the discretion to require a supervising solicitor.

Plaintiff’s undertaking:-

4. To comply with any order that the court may make it it later finds that the order or its carrying out has caused loss to the defendant and decides that the defendant should be compensated for that loss.
5. Issue a Writ of Summons as soon as is practicable
6. Where appropriate, to file an affidavit confirming the substance of what was said to the court by the Plaintiff’s solicitor.
7. To serve on the Defendant at the same time as the order is served upon him, the writ and copies of the affidavits and copiable exhibits containing the evidence relied on by the plaintiff
8. (where supervising solicitor is appointed) to serve on the defendant a copy of the supervising solicitor’s report on the carrying out of the order as soon as it is received and to produce a copy of the report to the court
9. Not(without leave of the court) to inform anyone else of the order or the carrying out of the order or to use any information or documents obtained as a result of carrying out the order except for the purposes of the proceedings or to inform any one else of the proceedings until the trial or further order
10. (where appropriate) insure the items removed from the premises.

Procedure:-

11. Prepare and file Writ of Summons and Statement of Claim
12. Service of Writ of Summons and Statement of Claim
13. Prepare and file:-

1. Ex Parte Summons;and
2. Affidavit in support

14. Attend before the duty registrar or judge to apply for urgent hearing date of the application
15. Attend court for hearing of the application for the search order
16. If granted – prepare and file order of court in the prescribed format.
17. Applicant appoints supervising solicitor
18. Service of the search order by supervising solicitor who is required to:-

1. Offer to explain to the person served, the meaning and effect of the search order; and
2. Inform the person served of his rights to seek legal advice and to apply to vary or discharge the search order

19. Execution of Search order in the presence of the supervising solicitor
20. Defendants (before permitting entry) may seek legal advice and/or apply to court to vary or discharge the search order. While this is being done, he may refuse entry to permit the search for a short time (not exceeding 2 hours) unless applicant or supervising solicitor agrees to a longer period
21. After the execution of the search order, the plaintiff’s solicitors may prepare a list of items to be removed if any, from the premises searched
22. If required, the supervising solicitor is to prepare and submit the report setting out details of the search

Discovery: Order 24

Stage where pleadings have closed and parties need to assess documentary evidence they will need to produce at trial to establish respective positions.

Mutual discovery allows them to reveal to each other the documentary evidence which bears upon the issues of the case – enable trial prep.

Encourages parties to settle by making them aware of the evidence.

O24 Rule 1:

Parties required to make and serve on each other lists of documents which are or have been in their possession power and custody relating to the matter in question within 14 days after pleadings are deemed to have closed.

Failure to do so (O24 r16) – court can make an order as it sees fits – including dismissing the action or defence struck out and judgment entered accordingly.

Words

Courtesy of a conversation with the clever Mr Flashlight:-

Word:

Antinomy:

1 : a contradiction between two apparently equally valid principles or between inferences correctly drawn from such principles
2 : a fundamental and apparently unresolvable conflict or contradiction (MW)

1.opposition between one law, principle, rule, etc., and another.
2. Philosophy. a contradiction between two statements, both apparently obtained by correct reasoning. (dictionary.com based on the Random House Dictionary)

Etymology: Latin --> "antinomia" contradiction between laws

Come thou fount of every blessing

From the 2nd verse:-

"Here I raise mine Ebenezer;
hither by thy help I'm come;
and I hope, by thy good pleasure,
safely to arrive at home.
Jesus sought me when a stranger,
wandering from the fold of God;
he, to rescue me from danger,
interposed his precious blood"

I wondered what Ebenezer meant and looked it up:-

Meaning: Stone of Help

Etymology: Combination of the Hebrew word for stone is “even” and the Hebrew word for help “Haazer”

"So it was that the ark remained in Kirjath Jearim a long time; it was there twenty years. And all the house of Israel lamented after the LORD. Then Samuel spoke to all the house of Israel, saying, “If you return to the LORD with all your hearts, then put away the foreign gods and the Ashtoreths[a] from among you, and prepare your hearts for the LORD, and serve Him only; and He will deliver you from the hand of the Philistines.”So the children of Israel put away the Baals and the Ashtoreths,[b] and served the LORD only. And Samuel said, “Gather all Israel to Mizpah, and I will pray to the LORD for you.”So they gathered together at Mizpah, drew water, and poured it out before the LORD. And they fasted that day, and said there, “We have sinned against the LORD.” And Samuel judged the children of Israel at Mizpah. Now when the Philistines heard that the children of Israel had gathered together at Mizpah, the lords of the Philistines went up against Israel. And when the children of Israel heard of it, they were afraid of the Philistines. So the children of Israel said to Samuel, “Do not cease to cry out to the LORD our God for us, that He may save us from the hand of the Philistines.”
And Samuel took a suckling lamb and offered it as a whole burnt offering to the LORD. Then Samuel cried out to the LORD for Israel, and the LORD answered him. Now as Samuel was offering up the burnt offering, the Philistines drew near to battle against Israel. But the LORD thundered with a loud thunder upon the Philistines that day, and so confused them that they were overcome before Israel. And the men of Israel went out of Mizpah and pursued the Philistines, and drove them back as far as below Beth Car. Then Samuel took a stone and set it up between Mizpah and Shen, and called its name Ebenezer,[c] saying, “Thus far the LORD has helped us.” (1 Sam 7:7-12)

Context:

This was during and/or just after (not sure which) a time when the Israelites had strayed from God, paying homage to other gods such as Baal and Ashtoreth (god of storm/lightning and goddess of fertility). (Cf Numbers 24 and 25) Israel (the nation state) had suffered a crushing defeat in the hands of the Philistines. (1 Samuel 4:1). After the Israelites repented before God for their straying, and God granted them victory over the Philistines, Samuel set up a stone as a marker and named it the stone of help. The site then became called “Ebenezer”.

(Disclaimer: this is totally the cliff notes version of the context,historically and geographically but all I really set out to do was lookup the meaning of the word.)

Law: Property Law

Landlord-Tenant relationship

This arises when one person (‘the landlord’) grants to another (‘the tenant’) a right to exclusive possession of land for a term less than that which the landlord has in the land.

***

Distrain: to force or compel to satisfy an obligation by distress/ to seize by distress (MW)

***

Forfeiture

This is a term referring to the right of re-entry by a landlord. Usually a lease will contain an express proviso for re-entry or forfeiture by the landlord on specified events such as the non-payment of rent, non performance or non observance of by the tenant of covenants of the lease.

New words and language structures

New Words -

Exegesis : to explain, interpret (MW), critical explanation or analysis, especially of a text (New american heritage dictionary), Explanation, exposition or critical explanation of a text or portion of scripture(Websters unabridged)

Eisegesis: the interpretation of a text, especially by reading into it, one's own ideas (MW). an interpretation of the text that expresses the reader's own ideas, bias or the like rather than the meaning of the text (Random Hse Dictionary)

Grammar -

predicate : the part of a sentence that expresses what is said of a subject. usually a verb, with or without subjects and/or adverbial modifiers.

preposition: a function word that combines with a noun phrase which expresses a modification or predication (MW). any member of a class of words that are typically used before nouns, pronouns or substantives to form phrases functioning as modifiers of verbs, nouns, or adjectives and that typically establish a spatial or temporal other r/s (dictionary.com)

Participle: a word that has characteristics of both a noun and an adjective. English verbal form that has the function of the adjective but shows such features as tense, voice and capacity to take an object. (MW) Adjective or complement to certain auxiliaries that is regularly derived from the verb in many instances and refers to participation in the action or state of the verb. it does not have a person or number in English but may have a subject or object, show tense. (eg 'burning' as in 'burning candle') (Random House dictionary) A form of verb in some languages (such as english) that can function independantly as an adjective such as the past participle 'baked' in 'we had some baked beans' and is used with some auxiliary verb to indicate, tense, aspect or voice such as the past participle 'baked' in the passive sentence ' the beans were baked too long'.

link to usage note - on dangling particples and how some particples are turned into prepositions.