scholarly journals TESTING THE EFFICIENCY MARKET HYPOTHESIS: AN EXAMPLE OD BOSNIA AND HERZEGOVINA

2019 ◽  
Vol 17 (1) ◽  
Author(s):  
Tijana Šoja ◽  
Zumreta Galijašević ◽  
Emina Ćeman
Keyword(s):  
Financial Markets ◽  
Bosnia And Herzegovina ◽  
Financial Market ◽  
Capital Market ◽  
Strong Influence ◽  
Weak Form ◽  
Financial Instruments ◽  
Price Movement ◽  
Run Test ◽  
Available Information

Governments of many countries, companies and business organizations last decades increasingly pay attention and recognize the importance of the capital market for economic growth and development. One of the factors that has strong influence on the capital market, as a platform for long-term borrowing and obtaining funds, is the price movement of financial instruments traded on capital market. The price movement of financial instruments is linked to the efficiency of the market, and is under strong influence of all available information about companies, which quickly reflect on the prices of financial instruments.Fama (1965) was one of the first economist who used term „efficient financial market“. He conducteda research on the financial market and pointed out that in an efficient market, on average, competition would cause that all effects of the latest market information will be included through the value of shares traded. The hypothesis of an efficient financial market suggests that the price of the shares, financial instruments, reflects all available information, so investor cannot realize extra profits if he has some certain insider information or on the basis of publicly available historical data and information. Many investors are trying to find those securities that are underestimated, and for which is expected to growth in the future. In a case of efficient financial market, it is quite impossible to find underestimated securities because information quickly incorporated into the price of securities. Ttesting of the efficiency of financial market is largely present in the developed markets, while somewhat weaker tests have been carried out on the examples of transitional financial markets. In published researches it is most often confirmed that transition countries have or have had poorly performing financial markets, especially in the initial stages of their development (Bahmani-Oskooee et al, 2016; Kvedaras and Basdevant, 2002).In this research we are testing the efficient market hypothesis for the financial market in Bosnia and Herzegovina. We tested hypothesis that the financial market is weakly efficient. For this test we are using stock index data from the Sarajevo and Banja Luka Stock Exchange, SASX10, BIRS and BATX index. The analysis includes daily, weekly and monthly index movements from 2006 to August 2018, for SASX 10 and BIRS indices, while BATX data is available from 2009 until August 2018. In the first step we calculate returns for all periods (deily, weekly and montly) between indicies and in another step we tested autocorrelation between their returns.Efficient market hypothesis has been tested through three statistical tests: autocorrelation test, run test and variance test. The results obtained by applying different tests do not give a single answer to the question whether financial market in Bosnia and Herzegovina perform at a low level of efficiency. Auto-correlation tests reject the hypothesis of weak form market efficiency,while the run test and the test of variance ratios confirm the weak form of market efficiency. Such findings suggest that it is not possible, with sufficient precision, to predict trends in the financial market in Bosnia and Herzegovina.

The Capital Market Authority Effectiveness in the Regulation of Financial Markets perspectives from the financial sector actors

2012 ◽  
Vol 02 (11) ◽  
pp. 15-24
Author(s):  
Charles Kombo Okioga
Keyword(s):  
Financial Markets ◽  
Financial Market ◽  
Capital Markets ◽  
Capital Market ◽  
Financial Regulation ◽  
International Standards ◽  
Market Regulation ◽  
Financial Market Regulation ◽  
Market Participants ◽  
New Business

Capital Market Authority in Kenya is in a development phase in order to be effective in the regulation of the financial markets. The market participants and the regulators are increasingly adopting international standards in order to make the capital markets in sync with those of developed markets. New products are being introduced and new business lines are being established. The Capital Markets Authority (Regulator) is constantly reviewing existing regulations and recommending changes to regulate the market properly. Business lines and activities are being harmonized by market participants to provide a one stop solution in order to meet the financial and securities services needs of the investors. The convergence of business lines and activities of market intermediaries gives rise to the diversity of a firm’s business operations to meet multiplicity of regulations that its activities are subject to. The methodology used in this study was designed to examine the relationship between capital markets Authority effective regulation and the performance of the financial markets. The study used correlation design, the study population consisted of 30 employees in financial institutions regulated by Capital Markets Authority and 80 investors. The study found out that effective financial market regulation has a significant relationship with the financial market performance indicated by (r=0.571, p<0.01) and (r=0.716, p≤0.01, the study recommended a further research on the factors that hinder effective financial regulation by the Capital Markets Authority.

scholarly journals The Architecture of Financial Networks and Models of Financial Instruments According to the “Just Transition Mechanism” at the European Level

2020 ◽  
Vol 13 (10) ◽  
pp. 235
Author(s):  
Otilia Manta ◽  
Kostas Gouliamos ◽  
Jie Kong ◽  
Zhou Li ◽  
Nguyen Minh Ha ◽  
...  
Keyword(s):  
Financial Markets ◽  
Financial Market ◽  
Research Priorities ◽  
Financial Instruments ◽  
Global Level ◽  
European Level ◽  
Support Tool ◽  
Eu Directive ◽  
Transition Mechanism ◽  
European Investment

At the global level and in particular the European level, challenges related to climate change and the transition to green transactions have created an imperative where identifying or developing innovative financial instruments, appropriate for these priorities, have become our research priorities and objectives. Starting from the analysis of the European Investment Plan for green transactions, as well as the EU Directive 2018/410 of the European Parliament and of the Council, in conjunction with ongoing efforts to identify innovative financing tools, research is presented based on hypotheses using concepts and models of green financing. The paper aims to analyze the main concepts and phenomena that could be considered generative factors for current financial market trends, as well as the inventory of facts and acts that provide a picture of the financial market. Based on these investigations, this paper suggest how we can best analyze the economic environment, processes, and resources in terms of their predictions regarding the sustainability of financial markets in the context of current challenges. Moreover, our paper aims to highlight in our empirical research the above-mentioned aspects, including the analysis of the emergence of new financial instruments at the global level with a direct impact on financial sustainability at the European level, including reflecting certain particularities of financial markets Romania. This research will be both a scientific contribution to the specialized literature and a possible support tool for the practical activities of entrepreneurs in their economic endeavor of developing sustainable businesses.

Financial markets as commensurating machines

2019 ◽  
Vol 58 (4) ◽  
pp. 539-565
Author(s):  
Barbara Kuchler
Keyword(s):  
Financial Markets ◽  
Capital Markets ◽  
Capital Market ◽  
Capital Flows ◽  
Financial System ◽  
Financial Assets ◽  
Financial Instruments ◽  
Black Scholes ◽  
Derivatives Markets

Ever since the crisis of 2008, the dynamism and self-referentiality of financial markets have puzzled observers. This article argues that this dynamism is the product of a long process of commensuration, by which ever more heterogeneous financial assets and financial instruments have come to be compared with, substituted for, and valuated relatively to one another, and have thereby been condensed into a highly interconnected financial system. This trajectory can be found both in the long-term historical emergence of financial markets from ancient origins and in the more recent transformations of the financial system since the 1970s, including (i) the rise of derivatives markets, and (ii) the rise of capital markets as against bank-intermediated capital flows. The rise of derivatives markets was triggered by the commensuration of basic securities (such as stock, bond) and derivatives (such as options, futures), established by the Black-Scholes-Merton theory of option pricing. The rise of capital markets was rooted in the commensuration – and hence, competition and substitution – of bank products (such as loans, deposits) and non-bank products (capital market securities).

The Emergence of a National Capital Market in England, 1710–1880

1993 ◽  
Vol 53 (1) ◽  
pp. 1-24 ◽  
Author(s):  
Moshe Buchinsky ◽  
Ben Polak
Keyword(s):  
Eighteenth Century ◽  
Financial Markets ◽  
Interest Rates ◽  
Financial Market ◽  
Capital Markets ◽  
Capital Market ◽  
Late Eighteenth Century ◽  
Regional Markets ◽  
Late Eighteenth ◽  
National Capital

Was eighteenth-century London's financial market linked to domestic real capital markets? When did English capital markets cease to be regionally segmented? We compare London interest rates with annual registered property transactions in Middlesex and in West Yorkshire. This evidence, though tentative, suggests that London financial markets were weakly linked to local real capital markets in the mid-eighteenth century. By the late eighteenth century those links were strong. Regional markets were still segmented in the mid-eighteenth century but were integrated by the time of the Napoleonic War.

scholarly journals The Essence and Significance of Financial Instruments for Enterprises in Poland in 2010-2018

2020 ◽  
Vol 3 (27) ◽  
pp. 109-124
Author(s):  
Marta Paduszyńska
Keyword(s):  
Financial Markets ◽  
Financial Market ◽  
Capital Investments ◽  
Financial Instruments ◽  
Financial Leverage ◽  
Central Statistical ◽  
Central Statistical Office ◽  
The Subject ◽  
Key Indicators

The purpose of the article/hypothesis: The aim of the study is an attempt to show the degree of use of financial instruments by non-financial enterprises operating on the Polish market and to determine whether their application translates into the financial results achieved by these enterprises. The hypothesis was adopted that the importance and use of financial instruments by enterprises on the Polish market is not significant, however, as a result of global transformations and the growing importance of financial markets, the activity of entities in this respect will increase. Methodology: In order to determine the degree of use of financial instruments among enterprises, the data published by the Central Statistical Office (GUS) for the years 2010–2018 were used and the key indicators illustrating the involvement of enterprises in the instruments available on the financial market were calculated. The literature on the subject was also reviewed and analyzed. Results of the research: The conducted considerations that non-financial enterprises in the polish market showed an increase in involvement in financial activities, as evidenced by the growing share of financial instruments, both on the active and passive side. On the passive side, the use of credits and loans in financing the activities of entities increased. This increase, however, did not translate into the use of the effects of financial leverage in the surveyed enterprises and an increase in the profitability of equity. In the case of assets, in the analyzed period there was an increase in the involvement of free funds in investments, mainly due to an increase in equity financial instruments. However, the analysis of financial revenues in total revenues may suggest that greater involvement in the financial sphere does not translate into profitability of assets and the results of the surveyed entities. It should be emphasized, however, that the development of the financial market and the increasing availability and variety of financial instruments strengthen the interest of enterprises in capital investments.

scholarly journals EFIKASNOST FINANSIJSKIH TRŽIŠTA / EFFICIENCY OF FINANCIAL MARKETS

2016 ◽  
Vol 11 (1) ◽  
Author(s):  
Predrag Kapor
Keyword(s):  
Financial Markets ◽  
Behavioral Finance ◽  
Stock Prices ◽  
Global Financial Crisis ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Strong Form ◽  
The Status ◽  
Finance Theory ◽  
Available Information

Are financial markets efficient is a question on which there is still no clear and complete answer. Position that prices of securities fully reflect available information about securities is called the efficient market hypothesis (EMH). The EMH (on the example of stocks) has three forms (or levels) of efficiency: 1) the ‘’ weak’’ form of the EMH- is the claim that stock prices reflect all information contained in previous transactions; 2) the ‘’ semi- strong’’ form of the EMH- is the claim that stock prices reflect all publicly available information, and 3) the’’ strong’’ form of the EMH- is the claim that stock prices reflect all relevant information (public and private), including the privileged (the insider) information.Numerous studies have confirmed the existence of a’’ weak’’ form of the EMH, and generally supported the existence of a’’ semi-strong’’ form of the EMH, but not of a ‘’ strong’’ form of the EMH. However, the EMH, even if it is a ‘’weak’’ or a ‘’semi-strong’’ form has a number of weaknesses. Some of the the EMH assumptions confront with the reality – there is no perfect information, transaction and information costs can be significant, markets are often imperfect, and investors do not have complete knowledge about the set of all available financial strategies for a given situation.The information ’’overload’’ confuses people and affects their ability to prioritize and make good decisions. On the other hand, electronic trading method significantly affects the information at the disposal of the different market actors. It seems that the greatest threat to the EMH comes from the field of behavioral finance, which is engaged in research on the possible impact of psychological factors (loss aversion, anchoring, overconfidence...) on the behavior of investors. The basic argument of behavioral finance is that ’’standard’’ financial theory is not paying attention to how ordinary people make decisions and that ‘’ human factor’’ can not be ignored.Tha aim of this study was to critically examine the EMH. Apperently, the EMH after numerous studes and identified anomalies, largely remains at the level of (insufficiently confirmed) hypothesis, although it is often given the status, or created an illusion, of confirmed. This is also because the EMH is an important component of the rulling ’’paradigm’’ in finance or ’’standard finance theory’’. Joperdizing the status of the EMH bring into question many other important components of this ’’paradigm’’.The EMH has not offered acceptable answers to some of the specific developments and events in the financial market, including the last global financial crisis. But, the EMH still remains one of the cornerstones of ’’standard’’ finance theory.

scholarly journals Financial policy regarding the categorization of individual investors in Russia and the area of protecting their interests

2020 ◽  
Vol 18 (4) ◽  
pp. 19-35
Author(s):  
Irina G. Gorlovskaya
Keyword(s):  
Financial Markets ◽  
Financial Market ◽  
Securities Market ◽  
Financial Policy ◽  
Individual Investors ◽  
Financial Risks ◽  
Financial Instruments ◽  
Basic Principles ◽  
The Face ◽  
Areas Of Protection

Development of modern economy and financial market is impossible without involving the mass investor in investment processes. This is the goal of the state's financial market policy. The need to preserve savings in the face of a reduction in the key rate, and therefore a decrease in interest, encourages individuals to invest more actively in securities. New investors come to the securities market, but they are not always able to adequately assess the risk of investing in securities. To reduce the risks of individual investors, there is used a categorization mechanism, which divides them into qualified and unqualified investors, but requires improvement. Based on the analysis, it is proved that the categorization of investors cannot be limited by the regulation of the criteria for their differentiation and requires specifying the areas of protection of the interests and rights of investors. The study is based on the pragmatic Solow-Williamson methodology and a systematic approach. The indicators of investor activity and indicators characterizing the degree of investor protection in the Russian securities market are analyzed. As a result, the problems of modern categorization of individual investors in the Russian Federation are identified and analyzed. The main areas of protection of investors' interests and rights are identified, including: the choice of a financial instrument; ensuring ownership of financial instruments; transactions with financial instruments; protection from misseling; disclosure of information by issuers and professional subjects of financial markets; illegal actions of professional subjects of financial markets in relation to financial risks and protection tools. Areas of protection of investors' interests and rights are correlated with risks and protection tools. There were defined basic principles of categorization of investors-individuals.

scholarly journals ANALISIS EFISIENSI PASAR MODAL SYARI’AH DAN KONVENSIONAL BENTUK LEMAH BURSA EFEK INDONESIA

2014 ◽  
Vol 4 (1) ◽  
pp. 65
Author(s):  
Aprinta Trisna Mujisukamto ◽  
Aftoni Sutanto
Keyword(s):  
Capital Markets ◽  
Capital Market ◽  
Stock Price ◽  
Random Number ◽  
Weak Form ◽  
Share Price ◽  
Efficient Market ◽  
Price Data ◽  
Run Test ◽  
Observation Period

The analysis in this study was to test the efficiency of the Indonesian capital market in the form of weak. this research has two objeactives, the first objectives is analyze whether Indonesia capital market (convensional and syari’ah) has been efficient (weak-form). The second one is to analyze differentiation efficient market between convensional and syari’ah capital market. This study uses monthly stock price data, from 23 conventional stocks included in the index LQ45 and 2 Islamic stocks included in the index during the observation period 2012-2013 JII. To test the hypothesis efficiency of capital markets weak form using the Run Test, this test is used to test randomness stock price changes. Results from this study are in the period 2012-2013 of conventional and islamic capital market is efficient in the weak form and analyze by looking for a random number of shares on the capital market conventional and islamic capital market, the results showed that there were 22 (95.7%) share price conventional random and 2 (100%) the share price of sharia are random. Based on the analysis of Islamic capital markets more efficient than the conventional capital market.

scholarly journals Investigating the efficiency of financial markets: Empirical evidence from MENA countries

2021 ◽  
Vol 18 (1) ◽  
pp. 250-259
Author(s):  
Izzeddien N. Ananzeh
Keyword(s):  
Financial Markets ◽  
North Africa ◽  
Unit Root ◽  
Unit Root Test ◽  
Weak Form ◽  
Ratio Test ◽  
Mena Region ◽  
Graduate Studies ◽  
Mena Countries ◽  
Run Test

The market efficiency hypothesis has become an important concept for all investors looking to own internationally diversified portfolios, which coincides with an increase in investment flows between all countries, both developed and undeveloped. This study was aimed at investigating the efficiency of a group of Arab stock markets located in the Middle East and North Africa (MENA) region according to the Random Walk Hypotheses (RWH) at weak form. The study covered the markets of Jordan, Egypt, Saudi Arabia, UAE, Bahrain, and Oman.The empirical results of all tests used in this study rejected the RWH at a weak form for all markets through all tests applied – Unit root test, Variance Ratio Test, and Run Test. The result of this study contradicts the results of many studies conducted on developed and emerging markets. This can be a good indication of the ineffectiveness of the reforms that have been adopted by responsible bodies on these markets.Based on this result, all efforts made to expand and deepen these markets should be intensified by improving liquidity, transparency, enhancing investment culture in these countries; supporting legislative and regulatory reforms to attract investment, and developing the financial sector in these markets as a whole. AcknowledgmentThis paper is supported by the Deanship of Scientific Research and Graduate Studies at Philadelphia University in Jordan.

scholarly journals ANALISIS EFISIENSI PASAR MODAL KONVENSIONAL BENTUK LEMAH DI BURSA EFEK INDONESIA PERIODE 2014-2015

2020 ◽  
Vol 7 (2) ◽  
pp. 101
Author(s):  
Ade Lisa Istifarida ◽  
Salamatun Asakdiyah
Keyword(s):  
Data Collection ◽  
Market Efficiency ◽  
Capital Market ◽  
Stock Price ◽  
Sampling Technique ◽  
Weak Form ◽  
Price Information ◽  
Purposive Sampling ◽  
Sample Testing ◽  
Run Test

The purpose of this study is to determine efficiency in a weak form conventional capital market in Indonesia using stock price data weekly in the 2014-2015 period. Techniques in testing market efficiency forms. This weakness uses a purposive sampling technique as well as a method for data collection using the documentation method. Obtained 36 companies which is included in the LQ-45 index which is used as a research sample. Testing the hypothesis of a weak form of capital market efficiency using the run test test. The results of this study, that the conventional capital market is efficient in a weak form using stock price information for the period research. It is proven by 33 shares (91.7%) moving randomly (random) and 3 shares (8.3%) move non-randomly (not randomly). Then it can be concluded that the conventional capital market is efficient in its form weak.

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