Efficient Markets, Risk Premia and Market Anomalies

This area is concerned with how markets work, how prices form, how one hedges against risk, robust methods for protecting returns against risk, and opportunities in the markets for making returns. OMI has distinguished researchers from the financial economics perspective who look at evidence from commodity markets on the limits to arbitrage and hedging, the international transmission of funding shocks, and the performance of hedge funds etc. But we also have researchers from a mathematical perspective focus on developing a robust approach to Mathematical Finance, which does not start with an a priori model but rather with the information available in the markets.

The perspective has changed rapidly over the last few years.  Pre-crisis finance often assumed that financial markets are efficient in their pricing risk management of the traded securities. The credit crunch exposed how much this hypothesis was far from the reality. It also exposed the fact that the traditional methods used for asset allocation suffer if the diversification argument on which they relayed is no longer valid. Such market anomalies are likely to be representative of the future patterns in markets behaviour. 

An important OMI focus in this area is to understand what the future paradigm of “mathematical finance” really is. What can be saved and what have to be modified to more adequately represent the changed reality of today.  


Meet the OMI members whose research relates to Efficient Markets, Risk Premia and Market Anomalies.


See the OMI events relating to Efficient Markets, Risk Premia and Market Anomalies.