Investigating market efficiency through a forecasting model based on differential equations
Charlene C. de Resende,
Adriano C.M. Pereira,
Rodrigo T.N. Cardoso and
A.R. Bosco de Magalhães
Physica A: Statistical Mechanics and its Applications, 2017, vol. 474, issue C, 199-212
A new differential equation based model for stock price trend forecast is proposed as a tool to investigate efficiency in an emerging market. Its predictive power showed statistically to be higher than the one of a completely random model, signaling towards the presence of arbitrage opportunities. Conditions for accuracy to be enhanced are investigated, and application of the model as part of a trading strategy is discussed.
Keywords: Stock markets; Financial series; Differential equation models; Econophysics (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:474:y:2017:i:c:p:199-212
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