Journal article

An exploration of Neo-Austrian theory applied to financial markets

H Benink, P Bossaerts

The Journal of Finance | WILEY-BLACKWELL | Published : 2001


We attempt to translate Neo-Austrian ideas about the workings of financial markets, as originally advanced by F. A. Hayek, into the standard probabilistic language of modern finance. We focus on an apparent paradox, namely the insistence of Neo-Austrians on order (i.e., stationarity) together with ever-reemerging inefficiencies. The paper's findings have implications beyond Neo-Austrian theory: They demonstrate how easy it is to reject market efficiency, but how much more difficult it is to discern the nature of the inefficiency. We illustrate our findings with price data from the U.S. Treasury bill market over the period 1962 to 1999. There is ample evidence that the price of a three-month ..

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University of Melbourne Researchers