New method predicts stock prices better, challenging Efficient Market Hypothesis.
The article tests if stock prices can be predicted using a new method called Ratio Statistic. This method looks at actual returns instead of logarithmic returns, making it better at predicting prices. The study shows that simple gross returns of stocks are not predictable after adjusting for a constant mean. This means that stock prices follow a random pattern and cannot be easily predicted. The researchers also looked at how this method can be applied to predict the returns of different financial series.