Why does 130 years of S&P serial correlation swing between efficient and inefficient eras, and what does an ecology of traders explain?
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Zero autocorrelation prediction versus 130 years of evidence
State the random walk prediction for the lag-1 autocorrelation of monthly returns, then describe the rolling five-year S&P Composite coefficient from 1871 to 2003: nonzero and not monotonically declining.
Who is trading sets the level of efficiency
Record the 1990s retail surge, the post-bubble shift to institutions from 2000 to 2008, the 1950s parallel and the late-2008 outlook, with each era's effect on efficiency.
measures deviations, not the trend
Write the formula, show that a constant mean return is subtracted off, and compute for a short return series of your choice with a positive mean.
Markets as an ecology of species
Contrast the physicist's and the biologist's way of analysing a market, and record how the adaptive markets hypothesis reconciles efficient-markets and behavioral finance, with theory working well only in some periods.