Abstract
The paper makes use of an event study to test the Efficient Market Hypothesis and its variant, the Uncertain Information Hypothesis, for the Brazilian stock market. Previous literature has associated inefficiencies generated by thin markets with investor overreaction or underreaction, thereby refuting the Efficient Market Hypothesis. However, the arrival of new information introduces a period of increased risk and uncertainty to the rational agents. The Uncertain Information Hypothesis was devised to be a more realistic variation of the efficiency theory, since it accounts for investor reactions to unexpected surprises. The evidence found here indicates that neither the Efficient Market nor the Uncertain Information Hypotheses are supported by the Brazilian data. Actually, we found evidence that the Brazilian stock market overreacts to positive shocks and underreacts to negative shocks, which suggests the prevalence of institutional inefficiency.
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