Two experiments in the stability of stock statistics
نویسنده
چکیده
This paper announces support in the form of the Spearman rank correlation test for the hypothesis: stock variance is a stable commodity, but the covariance of stocks varies randomly. Among the consequences of this hypothesis are: 1. Arbitrage equations involving covariances do not constrain the marketplace. 2. Variance is a stable commodity whose price is set by the arbitrage opportunities it presents. 3. Portfolio theories depending on estimates of future stock covariances are not at present useful theories. The result is not unexpected, however the conclusions challenge some of the existing literature.
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