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Endnotes

  1. If the probability of good news is greater than the probability of bad news, the price should increase before the news comes out. Technically, it is that the expected value of the next information release is zero.

  1. Alexander, S. S., 1964, “Price Movements in Speculative Markets: Trends or Random Walks,” in The Random Character of Stock Market Prices, MIT Press; Cootner, P. H., 1962, Stock Prices: Random versus Systematic Changes, Industrial Management Review, v3, 24–45; and Fama, E. F., 1965, The Behavior of Stock Market Prices, Journal of Business, v38, 34–105. All three studies estimated serial correlation in stock prices. Given the difficulty of obtaining data, they worked with small samples over short periods.


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