tag:blogger.com,1999:blog-6837159629100463303.post299992133540590683..comments2023-06-18T01:25:08.748-07:00Comments on Information Transfer Economics: Predicting unpredictabilityJason Smithhttp://www.blogger.com/profile/12680061127040420047noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-6837159629100463303.post-22217298932900608812015-03-17T19:46:40.563-07:002015-03-17T19:46:40.563-07:00I guess in that sense the fractal hypothesis makes...I guess in that sense the fractal hypothesis makes the problem worse as now it is taking a path that reflects the trading strategies on top of the states of the worlds...LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-86189958802138050202015-03-17T15:32:51.574-07:002015-03-17T15:32:51.574-07:00Thanks for the link; interesting.
The kind of enc...Thanks for the link; interesting.<br /><br />The kind of encoding I was thinking of is a bit different -- where you could read a single price change and it would tell you two or more pieces of information (like the demand shift and the supply shift). Essentially solving the identification problem, for example.<br /><br />Or another way, like Godel numbering, each price number encodes some state of the world.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-21732506252477564302015-03-17T12:40:31.994-07:002015-03-17T12:40:31.994-07:00fair enough on the EMH being better as an assumpti...fair enough on the EMH being better as an assumption...but as far as prices as fractals go, a friend of mine once showed me this paper... http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2338439<br />LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-30314081283704239752015-03-17T12:06:52.901-07:002015-03-17T12:06:52.901-07:00Hi LAL,
The main point I was trying to make was t...Hi LAL,<br /><br />The main point I was trying to make was that the EMH doesn't "predict" unpredictability (hence the title). The EMH is better cast as the EMA: the Efficient Markets Assumption and assuming the EMH is assuming unpredictability.<br /><br />As an aside, the use of the word "information" defining what is meant by efficient is problematic. A one-dimensional variable cannot contain the information required to represent <a href="http://informationtransfereconomics.blogspot.com/2015/03/the-price-system-as-communication.html" rel="nofollow">multi-dimensional states of the world</a> [1]. There will always be information loss even in weak form efficiency if prices are receiving the information from the world.<br /><br />[1] Fractal representations can take a 1D space and make it behave more like 2D, but I don't think anyone has seriously put forward the idea that prices encode information fractally.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-51685576175078992112015-03-17T09:32:46.383-07:002015-03-17T09:32:46.383-07:00if you are going to be so uncharitable to Levine.....if you are going to be so uncharitable to Levine...you should be just as uncharitable to Krugman. It was Krugman's failure of imagination that saw the financial crisis and subsequent recession as evidence against RE and EMH. All of this useless posturing since 2009 is his fault for that truly childish article "How Did Economists Get it So Wrong".<br /><br />if you are reacting so poorly to Levine's informal treatment of Physics I think you actually understand perfectly well his point: non-experts stepping in and trying to use vocabulary they don't understand. Even worse is when Krugman writes articles deliberately allowing a misinterpretation of the word "efficient" in the EMH.<br /><br />Congratulations to Brad Delong for once again tearing down evidence in a manner that proves the argument of the author...LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.com