Entropy-Based Behavioural Efficiency of the Financial Market
The most known and used abstract model of the financial market is based on the concept of the informational efficiency (EMH) of that market. The paper proposes an alternative which could be named the behavioural efficiency of the financial market, which is based on the behavioural entropy instead of the informational entropy. More specifically, the paper supports the idea that, in the financial market, the only measure (if any) of the entropy is the available behaviours indicated by the implicit information. Therefore, the behavioural entropy is linked to the concept of behavioural efficiency. The paper argues that, in fact, in the financial markets, there is not a (real) informational effi…
A Proposal for an Automatic Stabilizer in Social Justice
Abstract Generally, social justice has two sides which are intercorrelated and inter-dependend: a) constitutive social justice (for example, the so called commutative social justice); b) regulative social justice (for example, the so called distributive social justice). The paper approaches the regulative social justice, more exactly, an automatic mechanism to get it. To this end, an automatic stabilizer to provide distributive social justice, according to the Rawlsian principle of difference. Such an automatic stabilizer is grounded on the wealth, more precise, on the share of the wealth which is not invested in order to benefit to the more disadvantaged class of the society. Paper does no…
Efficient or Fractal Market Hypothesis? A Stock Indexes Modelling Using Geometric Brownian Motion and Geometric Fractional Brownian Motion
In this article, we propose a test of the dynamics of stock market indexes typical of the US and EU capital markets in order to determine which of the two fundamental hypotheses, efficient market hypothesis (EMH) or fractal market hypothesis (FMH), best describes market behavior. The article’s major goal is to show how to appropriately model return distributions for financial market indexes, specifically which geometric Brownian motion (GBM) and geometric fractional Brownian motion (GFBM) dynamic equations best define the evolution of the S&P 500 and Stoxx Europe 600 stock indexes. Daily stock index data were acquired from the Thomson Reuters Eikon database during a ten-year period, fro…