# Tag Info

8

In the below figure, CDF $F(\cdot)$ is first-order stochastically dominated by $G(\cdot)$. But $X_1$ and $X_2$ fall within the support of both distributions. So it would be possible to draw $X_1$ from $F$ and $X_2$ from $G$, or to draw $X_2$ from $F$ and $X_1$ from $G$. More generally, if $X_G$ is a draw from $G$ and $X_F$ is a draw from $F$ then $X_F-X_G$ ...

7

Generally speaking no. You wouldn't be able to distinguish re-balancing for risk aversion reasons from re-balancing motivated by changes in expected returns or the co-variance of returns. Consider the simple case of a household periodically re-balancing their investments in across both a fixed index fund and an equity index fund. The econometrician sees ...

7

The efficient market hypothesis does not imply that there are no patterns! As Eugene Fama pointed out decades ago, any test of market efficiency is a joint test of market efficiency and an asset pricing model. The EMH on its own is not a testable theory. If I understand your statement properly, you're claiming that forecasting variance would violate market ...

5


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