Form Of Efficient Market Hypothesis Research Articles

Empirical Examination of the Weak Form of Efficient Market Hypothesis: Insights from the Bahrain Bourse

Empirical Examination of the Weak Form of Efficient Market Hypothesis: Insights from the Bahrain Bourse

The Market Efficiency of Socially Responsible Indices in India

Socially Responsible Indices allow investors to invest in those companies which are deemed to be socially responsible. These indices comprise those constituent companies screened and assessed for environmental, social and governance (ESG) criteria. This paper analyses the weak form of the Efficient Market Hypothesis (EMH) for socially responsible investment indices in India. The authors used the daily closing price of two indices, Carbonex and Greenex, from June 3, 2013, to December 31, 2022. This study conducted Augmented Dickey Fuller, normality, and autocorrelation tests to analyse the randomness of prices and test whether the future price can be predicted using the past price. The weak form theory of the efficient market hypothesis is violated if the returns are not random and dependent on past returns, thereby enabling investors to gain abnormal returns by extrapolating the past data. The research results suggest that the theory of weak form of efficient market hypothesis is valid for Carbonex and Greenex, which are the socially responsible indices of India. It implies that the future movement of returns for socially responsible investment indices in India cannot be predicted from past prices. Therefore, the opportunity to gain abnormal returns is not possible.

The Relationship Between Stock Market and Market Efficiency: the Nigerian Experience

The efficient market hypothesis (EMH) has been subject to debate for decades. The field of behavioural finance was developed in response to the body of anomalous evidence with regard to the EMH. However important the establishment of the EMH by Fama in 1970, the first ideas on a theory of efficient markets can be traced back to the origins of modern economics. Reviewing seminal work underlying the efficient markets theory, and focusing on the development of appropriate methodology to test for weak form market efficiency. The study empirically investigated the effect of stock market on efficient market hypothesis with emphasis on weak form hypothesis for the period of 1986 to 2021. Using descriptive analysis and Ordinary Lease Square regression econometric approach to analyze the relationship between stock market and market efficiency in Nigerian. The outcome from the result found that market capitalization has significant effect on share price while value of transaction had insignificant effect on share price in Nigeria, the study therefore concluded there is existence of weak form of efficient market hypothesis in Nigeria stock market. Keywords: Stock Market, Market Efficiency, Nigeria DOI: 10.7176/EJBM/15-4-06 Publication date: February 28 th 2023

Testing the weak form of efficient market hypothesis: case of five major sectors of Tunisian stock market

Testing the weak form of efficient market hypothesis: case of five major sectors of Tunisian stock market

A test of the weak form of efficient market hypothesis in Indian Stock Market using momentum and contrarian effect

A test of the weak form of efficient market hypothesis in Indian Stock Market using momentum and contrarian effect

Testing the weak form of efficient market hypothesis: Case of Five Major Sectors of Tunisian Stock Market

Testing the weak form of efficient market hypothesis: Case of Five Major Sectors of Tunisian Stock Market

Testing the weak form of efficient market hypothesis for socially responsible and Shariah indexes in the USA

PurposeBy testing the weak form of efficient market hypothesis (EMH) this study aims to forecast the short-term stock prices of the US Dow and Jones environmental socially responsible index (SRI) and Shariah compliance index (SCI).Design/methodology/approachThis study checks the validity of the weak form of EMH for both SCI and SRI prices by using different parametric and non-parametric tests, i.e. augmented Dickey-Fuller test, Philip-Perron test, runs test and variance ratio test. If the EMH is invalid, the research further forecasts short-term stock prices by applying autoregressive integrated moving average (ARIMA) model using daily price data from 2010 to 2018.FindingsThe research confirms that a weak form of EMH is not valid in the US SRI and SCI. The historical data can predict short-term future price movements by using technical ARIMA model.Research limitations/implicationsThis study provides better guidance to risk-averse national and international investors to earn higher returns in the US SRI and SCI. This study can be extended to test the EMH of Islamic equity in the Middle East and North Africa region and other top Islamic indexes in the world.Originality/valueThis study is a new addition to the existing literature of equity investment and price forecasting by comparing and investigating the market efficiency of two interrelated US SRI and SCI.

Impact of Selected Stock Splits on Stock Performance In India

Normally, investors perceive stock splits announcement in positive way. Hence, it becomes interesting phenomenon for many researchers. Thus, here, researcher has tried to study impact of selected stock splits on stock price performance in Indian stock market with reference to cumulative abnormal returns (CAR) and cumulative average abnormal returns (CAAR) by selecting 10 stock splits announced by BSE listed companies from different sectors during January 2021 to May 2021 period. The market model-event study methodology was used for the analysis. An event window of 81 days (t-40 to t+40) and estimation period of 30 days prior to stock splits announcements were used to investigate the market reaction. The findings of the analysis support the semi-strong form of efficient market hypothesis in Indian stock market.

Testing Weak Form of Market Efficiency of Exchange Traded Funds at the NSE Market

This study appreciates the importance of having a better understanding of the market efficiency when trading an Exchange Traded Fund of any given set of securities in an exchange market as it is extremely vital for any prospective investor who may be looking to make sound investment decisions as well as market trend predictions. When trading in a market with few traders who likes dominating the market through insider trading, it is more likely to experience securities exchange market without confidence of investors thus depicting weak form of efficient market efficiency. While testing of the weak form of efficient market hypothesis (EMH) of the Nairobi stock exchange (NSE) is done through daily as well as weekly index data from NSE 20 share index over the three months period. The research study applies the use of secondary data that was obtained from Nairobi Stock Exchange market website. This research has deviated from the normal and traditional linear approach to test market efficiency and use of using unit roots to test serial correlation. The daily returns in aspect to skewness and kurtosis was found to be non-normal. From the results, null hypothesis of normality was not rejected. In this study, there is the use of fractional integration thus utilization of ARFIMA to test long term memory and even the traditional unit root test is incorporated to compare both results thus giving a perfect conclusion on whether NSE stock market is definitely weak form efficient in the market. The NSE-20 share Index stocks are used to make an Exchange Traded Fund that is priced and forecasted. Ultimately, the forecasted values of ETF are done on the trend lines similar to the NSE-20 share Index trends, which helps investors to make informed financial decisions when buying any securities traded in NSE market.

Stock Market Response to Elections: An Event Study Method

The research paper examines the influence of elections on the stock market. The study analyses whether the market reaction would be the same when a party wins and comes to power for the second consecutive time. The study employs Market Model Event study methodology. The sample period taken for the study is 2014 to 2019. A sample of 31 companies listed in Bombay Stock Exchange is selected at random for the purpose of the study. For the elections held in 2014, an event window of 82 days was taken with 39 days prior to the event and 42 days post event. The event (t0) being the declaration of the election results. For the elections held in 2019 an event window of 83 days was taken with 41 days prior to the event and 41 days post event. The results indicate that the market reacts positively with significantly positive Average Abnormal Returns. The findings of the study reveal that the impact on the market is not the same between any two elections even when the same party comes to power for the second time. The semi-strong form of efficient market hypothesis holds true in the context of emerging markets like India.

Testing Weak-Form Market Efficiency: The Case of Saudi Arabia

The study intends to investigate if the stock market in Saudi Arabia follows the weak form of market efficiency using daily data from Tadawul All Share Index (TASI). The daily data was collected from January 2012 to January 2019. The study employed different of tests types such as: autocorrelation, unit root test, runs test, and variance decomposition test that are used to assess the daily data of the Saudi stock market. The results from autocorrelation, unit root test, runs test, and variance decomposition test indicate that the Saudi stock market does not follow the weak form of market efficiency. However, future studies are required to understand variations in the Saudi stock market prices. Additionally, the results recommend conducting further studies to test the semi-strong form of efficient market hypothesis in Saudi Arabia.Moreover, future studies also need to focus on the adoption of correction and regulations by the policymakers in the Saudi stock market.

Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets

The aim of this paper is to analyse integration and test the hypothesis of an efficient market, in its weak form, in sixteen international financial markets. The sample covers the period from January 2002 to July 2019 and is divided into three sub-periods. In order to achieve such an analysis, the aim is to provide answers to two questions. Has the global financial crisis intensified the financial integration of international markets? If there is a process of mean-reversion in the international stock markets, with arbitrage, the hypothesis of portfolio diversification will be feasible? The results suggest that the global financial crisis has intensified the integration level of international financial markets. Regarding random walk and market efficiency hypotheses, in its weak form, the results suggest the existence of a mean-reversion and the rejection of the hypothesis of information efficiency, in its weak form, in developed and emerging markets, European and non-European. In terms of portfolio diversification analysis, we see that levels of financial integration decreased significantly in the sub-period following the global financial crisis, namely with its respective benchmarks, such as the US market, Japan and Hong Kong. We can assess the existence of feasible diversification opportunities in the long term.

A guide on empirical tests of the EMH

PurposeThe efficient market hypothesis (EMH) states that asset prices in financial markets always reflect all available information about economic fundamentals. The purpose of this paper is to provide a guide as to which predictions of the EMH seem to be borne out by empirical evidence.Design/methodology/approachRather than following the classic three groups of tests for the different forms of EMH that are common in the literature, the authors consider how the two alternative definitions of the EMH and the joint hypothesis problem impact on the tests and leave the controversy unsolved. The authors briefly report the antecedents, the main theoretical and empirical contributions and recent literature on each type of tests.FindingsEventually, as a summary for each type of tests, the authors provide a critical view on the main sources of acrimony between the alternative schools of thought in understanding asset price formation.Originality/valueThe paper may be seen as an up-to-date introductory review for researchers on the different tests of the EMH performed, and for newcomers to understand the key sources of acrimony between rationalists and behaviorists.

Evaluación de la hipótesis de eficiencia débil y análisis de causalidad en las centrales de abastos de Colombia

En Colombia existen centros tradicionales de acopio donde se comercializan y distribuyen productos agrícolas. El precio de venta de estos productos es publicado por instituciones del Gobierno en informes semanales. Con el objetivo de determinar si las series de precios siguen una caminata aleatoria y si existen relaciones entre los centros, se aplican seis pruebas que evalúan la hipótesis de eficiencia débil y la prueba de causalidad de Granger. Para ello se analiza el precio histórico semanal de 28 productos agrícolas comercializados en seis mercados, durante la primera semana de 2013 a la última de 2017. Los principales resultados indican que los mercados tienden a la eficiencia, aunque no tienen el mismo nivel, ya que esta varía según el producto que se comercialice. Además, los centros en Manizales, Barranquilla y Villavicencio influyen sobre los precios de los mercados de Bogotá, Bucaramanga y Medellín

Testing efficient market hypothesis in developing Eastern European countries

This paper analyzes financial markets in four developing countries (Croatia, Serbia, Slovenia, Slovakia) using daily returns of their respective stock market indices from January 1, 2006 till December 31, 2016, timeframe which was rarely analyzed. Analysis was conducted by various statistical tests, more precisely serial correlation test, runs test, Augmented Dickey-Fuller test, unit root test, variance ratio test and test of January effect. Results suggest that all analyzed indices, except BelexLine (Serbia), confirm weak form of efficient market hypothesis, while the results on the index BelexLine are mixed and it can be concluded that it does not follow weak form of efficient market hypothesis. Given these results, it can be said that not only passive approach to portfolio management is more appropriate on all indices, except BelexLine, but also additional test and more complex models are necessary in order to confirm this conclusion.

Testing Weak Form of Efficient Market Hypothesis: Empirical Evidence for Bullions and Base Metal Segment of Indian Commodity Market

With the advent of higher level of trading in commodities, investors’ focus has moved towards commodity market in recent years. Efficiency of the markets is the main area of concern for market players and always considered a valuable addition to the body of knowledge on investment management. Among all the commodities traded in Indian commodity market, bullions and base metals have emerged as a bigger area of interest for the investors. Industrial usage of these commodities with their participation in individual's investor portfolio as an investment avenue, increases their relative importance among other commodities. This paper examines the weak-form of Efficient Market Hypothesis (EMH) for both the segments. The period of study is 8 years, commencing from 2009, daily spot prices of commodities have been used to test the market efficiency in weak form. The weak form efficiency is thoroughly scrutinized with the help of graphs, runs test, augmented dicker fully and variance ratio test. The results of all the tests deployed in the study are consistent with each other and confirms the weak-form inefficient behavior of bullions and base metals.

The market efficiency of socially responsible investment in Korea

PurposeThis paper aims to analyze the market efficiency of socially responsible investment in Korea. The authors used the daily price of the Dow Jones Sustainability Index Korea between January 2006 and December 2015.Design/methodology/approachTo analyze the unpredictability of the returns, the authors conducted runs tests, such as the Dickey–Fuller test, the Philip–Perron test, the variance ratio test and autocorrelation tests. These tests investigate whether the future price of socially responsible investment in Korea is dependent on its previous price. If the relationship is dependent, this will violate the theory of weak form of efficient market hypothesis which explains that the past price movements and data do not affect stock prices. Therefore, investors cannot gain any abnormal return by extrapolating the historical data.FindingsThe results suggest that the weak form of the efficient market hypothesis is not valid for the Dow Jones Sustainability Index Korea. This implies that the future price of the index is correlated with past prices. Hence, the future movement of socially responsible investment in Korea can be predicted and enables socially responsible investors to gain abnormal returns.Originality/valueThis is the first study to investigate the market efficiency of socially responsible investment in Korea.

Calendar return seasonality across sectors, sizes and styles - evidence from the Indian equity markets

As literature shows, market anomalies in their various forms exist in different markets around the globe. Evidence of seasonality of returns in any form, whether based on time period such as over specific days, weeks and months, or over size, such as large, medium or small or over different classifications such style (growth/value/momentum), or across various sectors or triggered by material announcements such as earnings, dividend, etc., are all contradictory to any of the three forms of efficient market hypothesis (EMH). In this paper we have made an attempt to find out calendar seasonality of returns in the Indian stock markets. We find that return seasonality exists in the Indian markets across sectors, sizes and styles during a 'month of the year' and during a 'day of the week'. These findings can be attributed to many behavioural aspects of investors and can be used by them in predicting the future returns, or in defining investment strategies in order to benefit from abnormal returns.

Calendar return seasonality across sectors, sizes and styles - evidence from the Indian equity markets

As literature shows, market anomalies in their various forms exist in different markets around the globe. Evidence of seasonality of returns in any form, whether based on time period such as over specific days, weeks and months, or over size, such as large, medium or small or over different classifications such style (growth/value/momentum), or across various sectors or triggered by material announcements such as earnings, dividend, etc., are all contradictory to any of the three forms of efficient market hypothesis (EMH). In this paper we have made an attempt to find out calendar seasonality of returns in the Indian stock markets. We find that return seasonality exists in the Indian markets across sectors, sizes and styles during a 'month of the year' and during a 'day of the week'. These findings can be attributed to many behavioural aspects of investors and can be used by them in predicting the future returns, or in defining investment strategies in order to benefit from abnormal returns.

Testing of weak form of efficient market hypothesis: evidence from the Bahrain Bourse

Efficient market hypothesis (EMH) states that financial markets are “informationally efficient”, implying that current prices fully reflect all available information. The present study aims at testing the weak form of market efficiency of the individual stocks listed on the Bahrain Bourse for the period 2011 to 2015. Weak form of EMH is tested using the Kolmogorov-Smirnov goodness of fit test, run test and autocorrelation test. The K-S test result concludes that in general the stock price movement does not follow random walk. The results of the runs test reveals that share prices of seven companies do not follow random walk. Autocorrelation tests reveal that share prices exhibit low to moderate correlation varying from negative to positive values. As the study shows mixed results, it is difficult to conclude the weak form of efficiency of Bahrain Bourse.