Testing the efficient market hypothesis in Latin American stock markets

2020 ◽  
Vol 540 ◽  
pp. 123082 ◽  
Author(s):  
M.A. Sánchez-Granero ◽  
K.A. Balladares ◽  
J.P. Ramos-Requena ◽  
J.E. Trinidad-Segovia
Keyword(s):  
Latin American ◽  
Stock Markets ◽  
Efficient Market Hypothesis ◽  
Efficient Market

scholarly journals Nonlinearities and Chaos: A New Analysis of CEE Stock Markets

Mathematics ◽  
2021 ◽  
Vol 9 (7) ◽  
pp. 707
Author(s):  
Claudiu Tiberiu Albulescu ◽  
Aviral Kumar Tiwari ◽  
Phouphet Kyophilavong
Keyword(s):  
Capital Markets ◽  
Stock Markets ◽  
Transition Period ◽  
Chaotic Behavior ◽  
Efficient Market Hypothesis ◽  
Eastern European ◽  
Price Behavior ◽  
Financial Systems ◽  
Efficient Market ◽  
Level Of Significance

After a long transition period, the Central and Eastern European (CEE) capital markets have consolidated their place in the financial systems. However, little is known about the price behavior and efficiency of these markets. In this context, using a battery of tests for nonlinear and chaotic behavior, we look for the presence of nonlinearities and chaos in five CEE stock markets. We document, in general, the presence of nonlinearities and chaos which questions the efficient market hypothesis. However, if all tests highlight a chaotic behavior for the analyzed index returns, there are noteworthy differences between the analyzed stock markets underlined by nonlinearity tests, which question, thus, their level of significance. Moreover, the results of nonlinearity tests partially contrast the previous findings reported in the literature on the same group of stock markets, showing, thus, a change in their recent behavior, compared with the 1990s.

Efficient Market Hypothesis for Islamic Capital Markets

2020 ◽  
pp. 489-523
Author(s):  
Hakan Altin
Keyword(s):  
Stock Markets ◽  
Explanatory Power ◽  
Market Price ◽  
Efficient Market Hypothesis ◽  
Global Markets ◽  
Efficient Market ◽  
Share Prices ◽  
Global Stock Markets ◽  
Stock Share ◽  
Theoretical Results

This study has two important findings firstly, the theoretical results related to the efficient market hypothesis; and secondly, the results of application. The theoretical results show that if the market price of an asset includes all the information that influences its price, then that market is an efficient market. According to the efficient market hypothesis, investors cannot earn gains above the market return. Since stock share prices are unpredictable, it is assumed that when the information that the market had already been expecting is finally announced, the stock share prices will not change. That is because this announcement does not contain any information that can change the prices. The results obtained from the application show that the existence of abnormal return is valid for Islamic Stock Markets. Therefore, the findings mediate against the efficient market hypothesis. However, when the size of abnormal returns is observed, the results are almost equal to market returns. This finding supports the efficient market hypothesis. Islamic stock markets are integrated with the world at least as much as the non-Islamic global markets are. Islamic stock markets act together with the non-Islamic global markets. The risks and returns that the Islamic and non-Islamic stock markets provide to the investors are very close to each other. In conclusion, the efficient market hypothesis maintains its explanatory power for both Islamic stock markets and non-Islamic global stock markets. Islamic markets offer new investment opportunities on a global scale.

scholarly journals Predictability of stock market indexes following large drawdowns and drawups

2021 ◽  
Vol 19 (1) ◽  
pp. 1-23
Author(s):  
Vinicius Ratton Brandi
Keyword(s):  
Stock Markets ◽  
Abnormal Returns ◽  
Efficient Market Hypothesis ◽  
Fixed Time ◽  
Uncertain Information ◽  
Short Term ◽  
Efficient Market ◽  
Information Hypothesis ◽  
Novel Approach ◽  
Lower Magnitude

The efficient market hypothesis is one of the most popular subjects in the empirical finance literature. Previous studies of the stock markets, which are mostly based on fixed-time price variations, have inconclusive findings: evidence of short-term predictability varies according to different samples and methodologies. We propose a novel approach and use drawdowns and drawups as triggers, to investigate the existence of short-term abnormal returns in the stock markets. As these measures are not computed within a fixed time horizon, they are flexible enough to capture subordinate, time-dependent processes that could drive market under- or overreaction. Most estimates in our results support the efficient market hypothesis. The underreaction hypothesis receives stronger support than does overreaction, with higher prevalence of return continuations than reversals. Evidence for the uncertain information hypothesis is present in some markets, mainly after lower-magnitude events.

Relevance and evolution of adaptive markets hypothesis: a review

2016 ◽  
Vol 8 (3) ◽  
pp. 166-179 ◽  
Author(s):  
Raj S. Dhankar ◽  
Devesh Shankar
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Design Methodology ◽  
Efficient Market Hypothesis ◽  
Efficient Markets ◽  
Informational Efficiency ◽  
Market Behavior ◽  
Efficient Market ◽  
Content Type ◽  
Dynamic Perspective

Purpose The purpose of this paper is to discuss the relevance and evolution of adaptive markets hypothesis (AMH) that has gained traction in the recent years, as it provides a dynamic perspective to the concept of informational efficiency. Design/methodology/approach This paper discusses several issues related to the concept of informationally efficient markets that have indicated efficient market hypothesis to be an incomplete portrayal of stock market behavior. Findings The authors find that a strict and perpetual adherence to informational efficiency is highly unlikely, and AMH provides a much more plausible description of the behavior of stock markets. Originality/value The authors provide a description of studies that examine the testable implications of AMH.

scholarly journals Testing Semi-strong Form Efficiency of Stock Market

2001 ◽  
Vol 40 (4II) ◽  
pp. 651-674 ◽  
Author(s):  
Salman Syed Ali ◽  
Khalid Mustafa
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Markets ◽  
Efficient Market Hypothesis ◽  
Seasonal Effects ◽  
Efficient Market ◽  
New Information ◽  
Empirical Regularities ◽  
Day Of The Week ◽  
Stock Traders

The efficient market hypothesis suggests that stock markets are “informationally efficient”. That is, any new information relevant to the market is spontaneously reflected in the stock prices. A consequence of this hypothesis is that past prices cannot have any predictive power for future prices once the current prices have been used as an explanatory variable. In other words the change in future prices depends only on arrival of new information that was unpredictable today hence it is based on surprise information. Another consequence of this hypothesis is that arbitrage opportunities are wiped out instantaneously. Empirical tests of the efficient market hypothesis actually test for these consequences in various ways. Some of them have been summarised in earlier chapters. These tests generally could not conclusively accept the random-walk hypothesis of stock returns even when GARCH effects were accounted for. Many studies have found empirical regularities that are contrary to the efficient market hypothesis. For example, the monthly, weekly and daily returns on stocks tend to exhibit discernable patterns, such as seasonal affects, month of the year affect, day of the week affect, hourly affect etc. In case of Pakistan’s stock markets too such affects are identified. Such as the Ramadan affect [see Hussain and Uppal (1999)], seasonal effects and day of the week affect. Further, the wide spread use of “technical analysis” among stock traders and their ability to predict to some extent the direction of movements in the prices of individual stocks over medium term testifies to the existence of patterns and seasonal trends.

scholarly journals Analiza efektywności informacyjnej w formie słabej na rynkach „soft commodities” z wykorzystaniem wybranych testów statystycznych

2017 ◽  
Vol 17(32) (3) ◽  
pp. 81-92
Author(s):  
Anna Górska ◽  
Monika Krawiec
Keyword(s):  
Stock Markets ◽  
Orange Juice ◽  
Statistical Tests ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Commodity Markets ◽  
Agricultural Products ◽  
Efficient Market ◽  
Spot Prices ◽  
Weak Form Efficiency

The Efficient Market Hypothesis received much attention in the late 1970s. Those early studies focused on examining the efficiency of stock markets, however since that time the researchers’ interest has shifted to commodity markets. The studies usually focus on the markets of oil and of agricultural products, mainly grains. The efficiency of soft commodities market is also examined but not to the same extent. Majority of investigations focus on single products of this category. Thus the aim of our paper is to extend the research and to analyze the weak-form efficiency of six soft commodities: coffee, cocoa, sugar, cotton, frozen concentrated orange juice and rubber. Data under consideration covers daily spot prices of the commodities in the period 2007-2016. Having calculated their logarithmic returns we perform the following statistical tests: runs test, autocorrelation test, Box-Pierce and Box –Ljung tests. As the results obtained are not homogenous, this opens a door to further investigations with the use of different methodology.

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