The variance ratio (VR) can be used to determine whether returns satisfy the efficient market hypothesis (EMH). Let n = 5 and r5,t be the five period log return at time t, where t = 1,2,..., T. 1. Express (r5,t— 75) in terms of deviations of the relevant one period log returns from their respective means. Denote 75 to be the mean of the five period log return.
The variance ratio (VR) can be used to determine whether returns satisfy the efficient market hypothesis (EMH). Let n = 5 and r5,t be the five period log return at time t, where t = 1,2,..., T. 1. Express (r5,t— 75) in terms of deviations of the relevant one period log returns from their respective means. Denote 75 to be the mean of the five period log return.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The variance ratio (VR) can be used to determine whether returns satisfy the efficient
market hypothesis (EMH). Let n = 5 and r5,t be the five period log return at time t,
where t = 1, 2,..., T.
1. Express (r5,t — Ã5) in terms of deviations of the relevant one period log returns from
their respective means. Denote 75 to be the mean of the five period log return.
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