School of Computer Science Interdisciplinary Lecture Series - Oddgeir Ottesen - The volatility puzzle: A reexamination
As part of this new seminar series, the School of Computer Science will invite scientists from other Schools at Reykjavík University to describe their research areas, the typical research problems that drive their development and the approaches that are used to seek their solutions in a way that is accessible a wide (computer science) audience. The aim of this series of seminars is to gain a first-hand account of the research activities carried out within the university and to see where computer science can contribute with its languages, computational models, algorithmic problem-solving approaches and way of thinking.
The Lecture Series is open for everyone.
The second talk is entitled "The volatility puzzle: A reexamination" will be delivered by Oddgeir Ottesen (Adjunct at The School of Business) and will be held on Thursday, 28th May, at 12:00 in room K5.
ABSTRACT
I will talk about tests of market efficiency. In particular I will focus on the question whether stock prices are too volatile. The presentation will be based on a paper I wrote. The talk will be accessible to a computer science audience. I will leave 15-20 minutes for discussions. The abstract of the paper is below.
This paper challenges the contention underlying the volatility puzzle that prices violate variance bounds implied by the present value relation. The research that showed prices were too volatile compared to the volatility of subsequent dividends implicitly assumed that the number of shares outstanding was constant. We employ the accepted econometric methodology of West (1988) on firms listed on the DJIA from 1983 to 2005 and find that stock prices do not violate variance bounds when all cash flows between firms and shareholders are taken into account.
