Edgar J. Wilson

Are Co-Integrated Stock Prices Consistent with the Efficient Market Hypothesis?

This paper responds to the unsatisfactory argument that there is no correspondence between co-integration and the efficient market hypothesis. A law of one co-integrating vector of prices is proposed for the exchange rate and domestic and overseas stock prices. Markets must therefore be efficient in long-run equilibrium because no arbitrage opportunities exist. However, arbitrage activity via the disequilibrium error correction allows above-average (risk-adjusted) returns to be earned in the short run. The elimination of these arbitrage opportunities means that stock market inefficiency in the short run ensures stock market efficiency in the long run.

Distinguished Fellow of the Economic Society of Australia, 2008: Alan Woodland

This citation acknowledges Professor Alan Woodland as an eminent Australian economist and surveys his exceptional international record of scholarship and research with a selection of his insightful contributions to the understanding of the complex issues of international trade, taxation and welfare. These issues are at the forefront of our nation’s economic priorities and it is appropriate that we formally recognise his outstanding contributions to the discipline study of economics with the award of Distinguished Fellow of the Economic Society of Australia.