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Tables of Contents for A Non-Random Walk Down Wall Street
Chapter/Section Title
Page #
Page Count
List of Figures
xiii
List of Tables
xv
Preface
xxi
Introduction
3
10
The Random Walk and Efficient Markets
4
2
The Current State of Efficient Markets
6
2
Practical Implications
8
5
Part I
13
172
Stock Market Prices Do Not Follow Random Walks: Evidence from a Simple Specification Test
17
30
The Specification Test
19
7
Homoskedastic Increments
20
4
Heteroskedastic Increments
24
2
The Random Walk Hypothesis for Weekly Returns
26
8
Results for Market Indexes
27
3
Results for Size-Based Portfolios
30
2
Results for Individual Securities
32
2
Spurious Autocorrelation Induced by Nontrading
34
4
The Mean-Reverting Alternative to the Random Walk
38
1
Conclusion
39
8
Appendix A2: Proof of Theorems
41
6
The Size and Power of the Variance Ratio Test in Finite Samples: A Monte Carlo Investigation
47
38
Introduction
47
2
The Variance Ratio Test
49
6
The IID Gaussian Null Hypothesis
49
3
The Heteroskedastic Null Hypothesis
52
2
Variance Ratios and Autocorrelations
54
1
Properties of the Test Statistic under the Null Hypothesis
55
13
The Gaussian IID Null Hypothesis
55
6
A Heteroskedastic Null Hypothesis
61
7
Power
68
13
The Variance Ratio Test for Large q
69
1
Power against a Stationary AR(1) Alternative
70
3
Two Unit Root Alternatives to the Random Walk
73
8
Conclusion
81
4
An Econometric Analysis of Nonsynchronous Trading
85
30
Introduction
85
3
A Model of Nonsynchronous Trading
88
7
Implications for Individual Returns
90
3
Implications for Portfolio Returns
93
2
Time Aggregation
95
4
An Empirical Analysis of Nontrading
99
6
Daily Nontrading Probabilities Implicit in Autocorrelations
101
3
Nontrading and Index Autocorrelations
104
1
Extensions and Generalizations
105
10
Appendix A4: Proof of Propositions
108
7
When Are Contrarian Profits Due to Stock Market Overreaction?
115
32
Introduction
115
3
A Summary of Recent Findings
118
3
Analysis of Contrarian Profitability
121
11
The Independently and Identically Distributed Benchmark
124
1
Stock Market Overreaction and Fads
124
2
Trading on White Noise and Lead-Lag Relations
126
1
Lead-Lag Effects and Nonsynchronous Trading
127
3
A Positively Dependent Common Factor and the Bid-Ask Spread
130
2
An Empirical Appraisal of Overreaction
132
8
Long Horizons Versus Short Horizons
140
2
Conclusion
142
5
Appendix A5
143
4
Long-Term Memory in Stock Market Prices
147
38
Introduction
147
2
Long-Range Versus Short-Range Dependence
149
6
The Null Hypothesis
149
3
Long-Range Dependent Alternatives
152
3
The Rescaled Range Statistic
155
10
The Modified R/S Statistic
158
2
The Asymptotic Distribution of Qn
160
1
The Relation Between Qn and Qn
161
2
The Behavior of Qn Under Long Memory Alternatives
163
2
R/S Analysis for Stock Market Returns
165
6
The Evidence for Weekly and Monthly Returns
166
5
Size and Power
171
8
The Size of the R/S Test
171
3
Power Against Fractionally-Differenced Alternatives
174
5
Conclusion
179
6
Appendix A6: Proof of Theorems
181
4
Part II
185
100
Multifactor Models Do Not Explain Deviations from the CAPM
189
24
Introduction
189
3
Linear Pricing Models, Mean-Variance Analysis, and the Optimal Orthogonal Portfolio
192
3
Squared Sharpe Measures
195
1
Implications for Risk-Based Versus Nonrisk-Based Alternatives
196
12
Zero Intercept F-Test
197
1
Testing Approach
198
8
Estimation Approach
206
2
Asymptotic Arbitrage in Finite Economies
208
4
Conclusion
212
1
Data-Snooping Biases in Tests of Financial Asset Pricing Models
213
36
Quantifying Data-Snooping Biases With Induced Order Statistics
215
15
Asymptotic Properties of Induced Order Statistics
216
3
Biases of Tests Based on Individual Securities
219
5
Biases of Tests Based on Portfolios of Securities
224
4
Interpreting Data-Snooping Bias as Power
228
2
Monte Carlo Results
230
8
Simulation Results for &thetas;p
231
1
Effects of Induced Ordering on F-Tests
231
5
F-Tests With Cross-Sectional Dependence
236
2
Two Empirical Examples
238
5
Sorting By Beta
238
2
Sorting By Size
240
3
How the Data Get Snooped
243
3
Conclusion
246
3
Maximizing Predictability in the Stock and Bond Markets
249
36
Introduction
249
3
Motivation
252
5
Predicting Factors vs. Predicting Returns
252
2
Numerical Illustration
254
2
Empirical Illustration
256
1
Maximizing Predictability
257
3
Maximally Predictable Portfolio
258
1
Example: One-Factor Model
259
1
An Empirical Implementation
260
13
The Conditional Factors
261
1
Estimating the Conditional-Factor Model
262
7
Maximizing Predictability
269
2
The Maximally Predictable Portfolios
271
2
Statistical Inference for the Maximal R2
273
3
Monte Carlo Analysis
273
3
Three Out-of-Sample Measures of Predictability
276
7
Naive vs. Conditional Forecasts
276
3
Merton's Measure of Market Timing
279
2
The Profitability of Predictability
281
2
Conclusion
283
2
Part III
285
110
An Ordered Probit Analysis of Transaction Stock Prices
287
60
Introduction
287
3
The Ordered Probit Model
290
5
Other Models of Discreteness
294
1
The Likelihood Function
294
1
The Data
295
12
Sample Statistics
297
10
The Empirical Specification
307
3
The Maximum Likelihood Estimates
310
10
Diagnostics
316
2
Endogeneity of Δtk and IBSk
318
2
Applications
320
18
Order-Flow Dependence
321
1
Measuring Price Impact Per Unit Volume of Trade
322
9
Does Discreteness Matter?
331
7
A Larger Sample
338
6
Conclusion
344
3
Index-Futures Arbitrage and the Behavior of Stock Index Futures Prices
347
22
Arbitrage Strategies and the Behavior of Stock Index Futures Prices
348
4
Forward Contracts on Stock Indexes (No Transaction Costs)
349
1
The Impact of Transaction Costs
350
2
Empirical Evidence
352
15
Data
353
1
Behavior of Futures and Index Series
354
6
The Behavior of the Mispricing Series
360
4
Path Dependence of Mispricing
364
3
Conclusion
367
2
Order Imbalances and Stock Price Movements on October 19 and 20, 1987
369
26
Some Preliminaries
370
3
The Source of the Data
371
1
The Published Standard and Poor's Index
372
1
The Constructed Indexes
373
5
Buying and Selling Pressure
378
9
A Measure of Order Imbalance
378
2
Time-Series Results
380
1
Cross-Sectional Results
381
4
Return Reversals
385
2
Conclusion
387
8
Appendix A12
389
1
Index Levels
389
4
Fifteen-Minute Index Returns
393
2
References
395
22
Index
417
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