Market Hypothesis Research Articles

The Market Efficiency Debate: Developments of Financial Market Theories

A united hypothesis to explain the price movement of financial assets has been a significant research goal over the past few decades. This paper reviews the existing literature on both Efficient Markets and Behavioral Finance, concluding with more contemporary literature that attempts to combine the two theories. It summarizes the EMH and Behavioral Finance concepts, the debate between them, and the evidence supporting both. By recognizing the vast swaths of evidence in support of both hypotehses, one can conclude that the questions surrounding the efficiency or inefficiency of markets remain unanswered. Instead, the evidence supporting both hypotheses suggests the necessity of a compromise to rationalize these results instead of relying on one hypothesis or another. The compromise between both hypotheses, in turn, makes the debate between efficiency and inefficiency almost moot. Researchers must account for human misbehavior and rational expectations on a spectrum when formulating new market hypotheses, remaining open to changes in market theory as new variables continue to be discovered.

Labor Markets and Unemployment

As science and technology advance by leaps and bounds, they are gradually penetrating into every aspect of people's lives. Then currently, science is making giant strides in artificial intelligence growth at an astounding rate. In view of this trend, it shows with the current maturity of artificial intelligence technology, more and more low labor is replaced by machines. Based on the trend of future development above, model can be analyzed the maximum unemployment rate of the current market, and predict the relatively low future unemployment rate to help more people choose a occupation more conveniently. This article mainly analyzes some industries with the most unemployment rate and the industry with the smallest future unemployment rate through some of the readings of unemployment literature and industry unemployment data. In terms of research methods, the article's analysis is based on the multivariable linear regression model, calculation formula for unemployment rate, market hypotheses, and through the specific career data of doctor, lawyer and technician in recent years. With the total tendency to select the occupational population as the dependant variable, the occupational tax rate in US, the labor participation rate, and the risk coefficient are used as an independent variable, and the multi-linear regression model analysis is performed through data quantitative verification to calculate the actual number of people. Afterward used the unemployment population as a dependent variable, and the actual labor population is used as an independent variable, and the actual unemployment rate is derived through an unemployment calculation formula.

Disclosed qualitative factors and underpricing: an empirical evidence from Indian IPO market

PurposeThe academic research into underpricing of initial public offerings (IPOs) offers many explanations, i.e. signalling, financial and market hypothesis. However, another set of information, namely, “Qualitative Factors” (along with financial and others), are largely reported by the issuing firms in the prospectus. However, to the best of the authors’ knowledge no such systematic study has been carried out on how firms’ qualitative factors impact the IPO valuation. This paper aims to addresses this gap.Design/methodology/approachUsing a sample of 82 IPOs issued from 2014 to 2020, we investigate the issuing firm’s pattern of reporting qualitative factors. These qualitative factors are subjected to factor analysis. The authors classify all reported factors across firms into a few categories using principal component analysis. The authors also investigate the impact of these factors on IPO underpricing using OLS regression.FindingsThe authors find that the qualitative information relating to market leadership, established brand image and modern scalable information technology infrastructure significantly influences underpricing. The authors also document that market leadership and brand image are the influential reported quality factors that reduce underpricing. Moreover, location advantage, good customer relationship, established relationship with a client, track record of growth and profitability, experienced promoter and management team failed to influence underpricing.Originality/valueThe outcome of this piece of research offers additional signalling as an attestation of quality for the issue. The authors further argue that the amount of qualitative information disclosed by the managers in the prospectus to support the pricing should not be ignored.

Multifractal Analysis of the Foreign Exchange Markets Application to MENA Countries

The present study focus on the multifractal analysis of the exchange rate for Middle East North Africa (MENA) region from January 1999 to May 2017. The purpose of this paper is to examine the behavior of currency markets and to verify the efficiency hypothesis of FOREX market for these countries. We first estimate the scaling function to detect the multifractal character of each series and then the Hölder exponent, using the Generalized Quadratic Variation (GQV) method, as a function of time H(t). We conclude that there's a multifractal character for all these countries with a difference in the degree of persistence of each market.

Nurturing regional innovation: the effects of bank competition in the USA

Whilst corporate innovation is one of the key drivers of regional economic growth, question remains over how regional corporate activities are affected by local banking market structure. By attaching regional corporate innovation activities to a market power hypothesis, this paper examines: 1) if regional innovation activities would benefit from the improved banking market competition; 2) the variation of banking market competition effects on innovation outputs over unique regional characteristics, such as state-level R&D intensity and distribution of innovation activities. Using patent and citation data and local bank data from 51 states in the USA between 1992 and 2004, we show that improved local banking market competition increases both the quantity (patents) and quality (citations) of regional innovation outputs. It is also found that such a favourable effect on regional innovation is especially stronger for those states with low R&D intensity and those with more concentrated innovation activities.

Fibonacci Retracement in Stock Market

Stock market prediction is used to assure entry and exit of the investor by predicting the future of current market trend. The hypothesis of market can be either fundamental or technical analysis. This research paper helps in stock market trading by using the Fibonacci retracement. The retracement prediction deals with the psychological sentiment of the market in continuity. A Fibonacci retracement provides the correct time frame of entry and exit in 70% [13] of cases through Golden ratio, which is inclined to provide the good structural design of stock market. Fibonacci retracement hypothesis is based on the technical analysis to forecast the stock prices in near future.

THE IMPACT OF DIVIDEND ANNOUNCEMENT ON STOCK RETURNS AMONG THE TEN TOP COMPANIES IN PAKISTAN

The study tested the response of stock prices around the dividend declaration dates in Pakistan stock exchange. It estimated the data of 1110 dividends announced by 91 firms of the highest ten active sectors of Pakistan Stock Exchange. To empirically investigate the relationship between stock returns and dividend announcement, the panel regression was employed by creating dummy variables for 61 days around the dividend declaration dates. Cumulative average abnormal returns and average abnormal returns were also stimated around the events with the help of event study methodology. Outcomes of the empirical analysis revealed strong evidence of market abuse in the term of insider trading and supported the argument of the information content hypothesis and semistrong form of efficient market. Moreover, the study also found a robust impact of the probable ex-dividend date. The study recommended that it is a responsibility of stock exchange regulatory authorities, whistleblowers, registered companies, and the investors collectively to detect and punish this white-collar financial crime.

Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations

The endless arguments on which Efficient Market Hypotheses form Nigeria Stock exchange (NSE) belongs incited this study; Efficient Market Hypotheses controversy and Nigerian Stock Exchange Relations. In order to achieve the aim of this study, the All Share Index (ASI) with daily data from January 02, 2014 to May 20, 2019 (1333 observations) and annual data from 1985 to 2018 (34 observations) collected from the Nigeria Stock Market fact books. The study employed three analytical methods namely the unit root test, GARCH Model and the Autocorrelation cum patial autocorrelation method for the assessment of weak form hypothesis on the daily and annual all share index in the Nigerian Stock market. The results of these evaluations indicated a significant relationship between the price series and their lagged values implying that stock price series do not follow a random walk process in Nigerian stock market. Thus, affirming that the Nigeria Stock Exchange is not efficient in weak form. In the light of this, the researchers recommend that the supervisory and regulatory authorities should strengthen the Nigerian Stock Market through palliating its regulations pertaining to transparency of information management rules such as market barriers and stringent listing requirement, publication of accounts, notices of annual general meeting and the like.

Efficient Market Hypotheses –EMH (Lebanon and Arab Gulf states)

Various studies have been made to test the efficiency of market in Lebanon and Arab Gulf States (AGS) theoretically and empirically, focusing mainly on building a model using the conventional finance. The purpose of this paper is to test the efficiency of AGS financial markets as well as the Lebanese one based on stationary method; furthermore it explores the reasons behind the non-efficiency in case it exists. However, to realize this objective ,this paper overviews the different methods behind testing efficiency in order to choose and use the most common one ,furthermore it studies also the Volatility using ARCH and GARCH and the Financial Characteristics behind each market, which leads to either enhance or reduce market efficiency so far. Findings prove that Lebanese, Abu Dhabi, Qatar, and Kuwait markets tend to be efficient in its weak form whereas Dubai, Saudi Arabia and Amman markets are non-efficient based on the average monthly data series and financial characteristics of the market over a specific period of time.

ПОСТРОЕНИЕ ПОРТФЕЛЯ ШАРПА ДЛЯ ПАРЫ АКТИВОВ В УСЛОВИЯХ ГИПОТЕЗЫ ФРАКТАЛЬНОГО РЫНКА

Цель: показать, что инвестиционный портфель как инструмент фундаментального анализа может быть эффективно использован в техническом анализе в условиях гипотезы фрактального рынка на примере портфеля Шарпа. Обсуждение: инвестиционный портфель представляет собой инструмент фундаментального анализа. Однако развитие теории финансовых рынков, появление и становление гипотезы фрактального рынка поставило новую задачу – интеграцию инструментов фундаментального и технического анализа. В условиях фрактальной гипотезы цена одного актива в разных инвестиционных горизонтах может быть рассмотрена как совокупность активов. Поэтому инвестиционный портфель может быть рассмотрен теперь не как совокупность разных активов, а как инвестиция в один актив на разных инвестиционных горизонтах. Автором было показано, что подобная интеграция возможна не только теоретически, но и доказана на практике. Результаты: статья содержит расчеты, доказывающие, что портфель Шарпа может быть использован в техническом анализе в условиях фрактальной гипотезы.

Behavioral Efficient Markets

Discussions about market efficiency in finance are unfocused when they fail to distinguish between the price-equals-value market hypothesis and the hard-to-beat market hypothesis. And discussions are further lacking when they fail to explain why so many investors believe that markets are easy to beat when, in truth, they are hard to beat. As described in Finance for Normal People and this article, behavioral finance contributes positively to these discussions by making the distinction between the price-equals-value market hypothesis and the hard-to-beat market hypothesis and by explaining why so many investors believe that markets are easy to beat when, in truth, that is hard to do. Behavioral finance concludes that markets are not price-equals-value markets but they are rather hard-to-beat for investors lacking exclusively or narrowly-available information. And behavioral finance elucidates the cognitive and emotional errors that mislead investors with nothing but widely-available information into the belief that markets are easy to beat.

ASSESSMENT persistent time series hryvnia to the dollar US

Contemporary literature suggests that the effective market hypothesis is not substantiated. Instead, it suggests the Fractal Market Hypothesis (FMH). Fractal markets are characterized by long-term memory. The main feature of the fractal market is that the frequency distribution of the indicator looks the same across diffe­ rent investment horizons. In such cases, it is said that for an appropriate indicator, the phenomenon of scale invariance is observed. All daily changes are correlated with all future daily changes, all weekly changes are correlated with all future weekly changes. There is no characteristic time scale, a key characteristic of the time series. The presence of memory in the time series can be characterized by the Hearst indicator. This paper analyzes the hryvnia to US dollar exchange rate for the period 04.06.14-04.01.15. Finding the Hearst index made it possible to conclude that there is or is not long-term memory in this series. The presence of long-term memory indi­ cates that the efficient market hypothesis is unjustified. The hypothesis was tested that the longer the averaging intervals are taken into account in the model, the Hearst's index decreases. The analysis does not have great predictive power, however, it allows to identify the presence or absence of long-term memory in the study process and thus to accept or reject the hypothesis of an effective market. That is, the series under study is persistent, thus demonstrating long-term me­ mory availability. Thus, since persistence is revealed, the hypothesis of an effective market for the exchange rate yield is not confirmed, but instead can be argued for the fractality of the hryvnia / dollar exchange rate yield. Therefore, the application of the proposed approach made it possible to find the Hearst rate for the hryvnia / dollar exchange rate. The value found indicates that the effective market hypothesis is not substantiated for at least such an exchange rate.

Review of the Literatures on Stock Price Behavior of Malaysia

Stock price behavior is one of the core concerns of researchers and finance scholars from more than a half-century of years. Most of the times, they have tried to identify unexplored anomalies that could be used to explain stock price movement in the different stock market. As a result, we have found different models and theories relating to stock price behavior as well as the efficiency of the stock market. Malaysian stock market is considered the second among the largest South East Asian stock markets according to its domestic market capitalization. A considerable number of researches have already been done on the stock price behavior of Malaysian stock market. This study reviews the existing literatures on the stock price behavior of Malaysian stock markets within two wings, literatures on efficient market hypothesis of Malaysian market and the effect of economic and financial variables on the stock price.

Behavioral Efficient Markets

Discussions about market efficiency in finance are unfocused when they fail to distinguish between the price-equals-value market hypothesis and the hard-to-beat market hypothesis. And discussions are further lacking when they fail to explain why so many investors believe that markets are easy to beat when, in truth, they are hard to beat. The author explains how behavioral finance contributes positively to these discussions by making the distinction between the price-equals-value market hypothesis and the hard-to-beat market hypothesis and by explaining why so many investors believe that markets are easy to beat when that is actually hard to do. Behavioral finance concludes that markets are not price-equals-value markets but they are rather hard-to-beat for investors lacking exclusively or narrowly-available information. And behavioral finance elucidates the cognitive and emotional errors that mislead investors with nothing but widely-available information into the belief that markets are easy to beat.

Social exchange approach in knowledge sharing of online communities – A Case of online health communities at Ho Chi Minh City

The demand to look for information and share information in nowaday society are a huge needed, especially in the internet revolution are developing more and more. The studies proposed the model that includes the benefit factors (sense of self-worth, face concern, reputation and social support) and cost factors (executional costs, cognitive costs) with the points of view of Social Exchange Theory that influences to knowledge donating behavior, knowledge collecting behavior and community promotion among members. The studies will be verified in health care member of the online health communities in Ho Chi Minh City. Quantitative research also was conducted 336 samples were used to evaluate and test the research. The results of the Structural Equation Modeling (SEM) show that the theoretical models are suited the market data and hypotheses of the research model are supported. In particular, factors of the benifit group (sense of self-worth, face concern, reputation and social support) have a positive impact on the knowledge donating behavior and knowledge collecting behavior. In addition, factors of the cost group (executional costs, cognitive costs) have a negative impact the knowledge donating behavior and knowledge collecting behavior. Knowledge donating behavior and knowledge collecting behavior have a positive impact on community promotion to the online health community. In addition, the results of multi-group analysis that there is no difference between knowledge sharing’s writing group and no knowledge sharing’s writing group. The results may be usefull for online health community, hospitals, doctors, individuals and businesses.

Semi-Strong Form of Market Efficiency : Does all Critical Information Affect Stock Price Valuations?

Information about company fundamentals, among many things, should determine the prices of stocks. Usually, financial markets operating under a semi strong efficient market (SSEM) hypothesis imply that market prices of equity scrips react to business and environmental information which is available in the public domain. However, the paper established that even though SSEM hypothesis may hold most of the time, all publicly available data may not necessarily be factored to buy or sell stocks. There could be instances where some critical information (say, ratios of business efficiency), which is publicly available, may not be considered in favour of more directly observed or easily derived piece of information, that is, sales or profits. The paper studied correlation of business aggressiveness or strategic intent (expenditure made by the business to improve its competitive position) and historical market value to book value ratio of select scrips. Evidence emanating from the study indicated that vital information, which may affect business performance, in many cases was ignored by the market while deriving stock prices. The paper also proposed a non-econometric technique to assess company fundamentals which could lead to assessing stocks which were likely to improve their valuations in the mid-term (1-2 years horizon). The study concerned five IT stocks listed on the BSE to examine whether market to book valuation behaved in some accordance with the firm's strategic intent (measured as business expenditure, that is, employee cost as a % of sales).

Testing capital market efficiency

This paper reviews the main tools to test the hypothesis of efficient market. We divide into two categories. First, we examine tests for return predictability. We expose random walk tests through variance ratios and the presence of long memory. Furthermore, we develop this part by including the imperfections of the market such as calendar anomalies and the trading volume. Then, we present event studies and different t tests employed in the field. We complete with the analysis of an information flow by presenting the non-parametric model and the test statistic. We also display empirical results from the literature for each category studied. Conclusions show that event studies question the efficiency contrary to tests for return predictability.

The Model of Financila Instruments Influence on the Capital Flow in Kazakhstan

The article objective is the study of exchange market and stock market financial instruments influence on capital flows in Kazakhstan. For this purpose possible influence factors on capital flows in Kazakhstan were analyzed. Statistical data on capital flows in Kazakhstan over a period from 2007 to 2013 were collected. Dynamics of capitalization on Kazakhstan Stock Exchange, the amount of issues of securities and number of issuers, Kazakhstan Stock Exchange index dynamics, banks residents’ exchange transactions’ volume, currency in cash transactions, foreign exchange cash import/ export by second-tier banks, currency trade volume in Kazakhstan Stock Exchange, interbank credit and deposits in Kazakhstan, on exchange average weighted exchange rate volume were collected and analyzed. Regression analysis is carried out, conclusions and recommendations are given. Found determination coefficient of 99% confirms the hypothesis of stock market and exchange market instruments influence on capital flows in Kazakhstan. The conclusion on the interrelation of capital flows and exchange market and stock market instruments is drawn based on calculated model. The following factors were also detected: the number of issues of securities eligible for trading in Kazakhstan Stock Exchange (KASE); the number of issuers of securities eligible for trading in stock exchange; banks residents’ transactions volume; net transactions by exchange offices (foreign exchange cash); foreign exchange cash import/ export by second-tier banks.

Volatility and efficiency of the world crude oil market

Purpose – The purpose of this paper is to examine volatility and the weak-form efficient market hypothesis (random walk) of world spot crude oil market. Design/methodology/approach – The study uses the generalized autoregressive conditional heteroskedasticity (GARCH-M), exponential generalized autoregressive conditional heteroskedasticity (EGARCH), and threshold GARCH (TGARCH) models. The data are selected from three markets: Dubai Vetch (DV), West Texas Intermediate, and Europe Brent Spot Price. Findings – The weak-form efficient market (random walk) hypothesis was rejected for all estimated GARCH-M, EGARCH, and TGARCH models, indicating that these markets are inefficient and predictable. For daily data, the empirical results showed the presence of asymmetric effects, and the conditional variance process was found to be highly persistent. Originality/value – This study is unique in its nature as it examines three markets on three continents. In addition, one of these markets (DV) was not carried out by the previous study. This work takes into account the market location.

A sector strategy from the Fama and French model

In this article, we test the degree of possible interest there may be in developing an investment strategy based on the three-factor Fama and French model (1992). To this end, we construct a sectorial strategy, taking as a market risk factor the sectorial index to which the securities belong. From our results, we conclude that the aforementioned strategy is of limited use, given that no extraordinary consistent yields are obtained. From this, we conclude that the hypothesis of the efficient market can be accepted.