Is it Real? Or is it Random? A Financial Turing Test of the JSE

R/Finance November Meetup

Join us from 4.30pm on Thursday, 24 November at Rise Cape Town where Stuart Reid (Quantitative Strategist at NMRQL and blogger at Turing Finance) will be presenting his R implementation of the heteroscedasticity-consistent variance ratio test developed by Lo and MacKinlay in 1988 to test the Random Walk Hypothesis. Stuart will then test whether or not the variance ratio test can distinguish between random fictitious securities and those traded on the JSE. Stuart will end off with some theories which could explain the results of the test, including the controversial Stable Paretian Hypothesis presented by Benoit Mandelbrot in 1963.

Some more to whet your appetite from Stuart…”In his now legendary Turing test of the weak-form Random Walk Hypothesis esteemed professor Burton G. Malkiel had his students flip a coin and record an increase or decrease in the price of a fictitious random security. The resulting equity curve was presented to a chartist who exclaimed that it was a massive buying opportunity. To quote Nassim Taleb: “the chartist was fooled by randomness”. The problem with this test is that is doesn’t actually imply that security prices are random, it only implies that at least some chartists can’t tell the difference between what is real and what is random.”

Registration is from 4.30pm with the presentation set to begin at 5pm. The talk should last 45mins after which Stuart is willing to take some questions and the rest of the time until 6.30pm is available for networking.

PLEASE NOTE: Seating is limited to 40 people and therefore subject to RSVP.


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