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An alternative description of the stochastic process generating security returns

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  • Hassanali Espahbodi
  • Pouran Espahbodi
  • Hassan Tehranian

Abstract

This research questions the appropriateness of the market model in describing the stochastic process generating security returns. A new descriptive model which considers the adaptive behaviour of economic agents and their partial adjustment to new information is proposed. Empirical results indicate that the proposed model is superior to the conventional market model in describing the returns generating process. These findings raise questions about previous studies concerning the information content of specific events or concerning the market efficiency.

Suggested Citation

  • Hassanali Espahbodi & Pouran Espahbodi & Hassan Tehranian, 1988. "An alternative description of the stochastic process generating security returns," Applied Stochastic Models and Data Analysis, John Wiley & Sons, vol. 4(1), pages 1-12, March.
    • Handle: RePEc:wly:apsmda:v:4:y:1988:i:1:p:1-12
    DOI: 10.1002/asm.3150040102
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