Although this is the inherent characteristic of the futures market, to some extent, as a market theory, there are indeed too many unresolved contradictions that need us to study.
Here are just a few theories to discuss four defects.
In 1964, Osberne published a random walk model and an efficient market hypothesis (EMH), proposing that the capital market price follows a random walk, pointing out that the market price is the response of the market to the randomly coming event information, and the investor's will cannot dominate the development of the situation, thus establishing a classical hypothesis of "overall rationality" of investors, and further assuming that the holding period yield of futures contracts obeys a normal distribution, so that it can be used.
From 65438 to 0965, economist Fama and others put forward the "efficient market hypothesis" on this basis. This theory assumes that investors who participate in the market are rational enough to respond to all market information quickly and reasonably. This is the theoretical basis for denying fundamental analysis and chart analysis. In fact, for investors, this is the theoretical reason why many people despise fundamental analysis and chart analysis.
Fama further strengthened his efficient market theory in 1970: because rational investors play games with irrational investors in a rational and impartial way, the former will gradually dominate the market, so that the market can at least achieve weak efficiency. In this process, the natural law of "market choice" makes rational investors become an effective force to dominate the market. Supporters of "Efficient Market Hypothesis" believe that irrational investors in the market will encounter arbitrage activities of rational investors, and "market selection" will make the irrational investors who make mistakes in a passive position (loss), thus being gradually eliminated from the market until the hedging opportunities disappear. Through this "trial and error" process, the market tends to a "no arbitrage equilibrium" state, and the market price gradually approaches its true value.
In this way, the "efficient market hypothesis" implies two judgments: first, irrational traders play a negligible role in the process of price formation, because they cannot influence prices for a long time; Second, investors can only maximize their profits by trading according to the intrinsic value of securities.
While the efficient market hypothesis CAPM was formed, Markowitz first put forward the modern portfolio theory with the method of "mean-variance". Tobin, Sharp, lintner and Mosin combined the efficient market hypothesis with markowitz's modern portfolio theory, and established an investor behavior model based on rational expectation under the general equilibrium framework. Modern portfolio theory, capital asset pricing theory and related "efficient market hypothesis" constitute the standard paradigm of traditional financial theory, which occupies a leading position in the field of financial theory research.
The characteristics of these theories are that on the basis of the normal distribution of holding period returns, the futures market is analyzed by mathematical statistics to guide futures investment.
For example, modern portfolio theory further assumes that investors always pursue a larger rate of return and a smaller rate of return variance (a measure of risk). After EMH denied investors' ability to predict prices, modern portfolio theory pointed out that investors are not idle, but can reduce investment risks and obtain as many average returns as possible through portfolio (putting eggs in multiple baskets).
Based on a series of additional assumptions, the capital asset pricing model points out that high-risk asset portfolios will have high return expectations, which is the so-called "risk-return swap". In practical application, according to this concept, the main job of investment managers is to design asset portfolios to meet the needs of different groups and different risk preferences.