Validity Of Efficient Market Hypothesis Research Articles

Momentum Effect all over the World

This study is intended to reaffirm the existence and profitability of momentum investment strategies in 40 countries around the world during the period 1996–2018. The contradictory findings of previous research on the existence and profitability of momentum strategies have raised a pertinent question on the validity of efficient market hypothesis. We documented the momentum effect in 90% of our sample countries of which 52.5% exhibited positive momentum effect while 37.5% exhibited negative momentum effect. The findings were robust to two distinct sub-period analyses. The clear rejection of efficient market hypotheses is valuable to momentum traders and stock market regulators.

Evidence for and Against the Validity of Efficient Market Hypothesis

Abstract The concept of an efficient financial market, in literature known as efficient market hypothesis (EMH), has had a long and difficult development path from the idea itself to its final conception, as one of the central paradigms in modern finance. It has been tested and critically reviewed for decades, and the two basic types of problems it has encountered are theoretical paradoxes and market anomalies. The aim of the paper is to examine the validity of EMH through various financial market efficiency tests and the results of previous research. The intention is to answer the question of whether, despite theoretical paradoxes and market anomalies, the notion of validity can be attributed to the concept of an efficient financial market. In this regard, the paper presents plenty of evidence for and against the validity of weak, semi-strong, and strong form of EMH, to conclude that, even after more than half a century of research, financial literature has not reached a consensus on the presence or absence of the validity of this hypothesis.

On Long Memory Behaviour and Predictability of Financial Markets

An immediate consequence of the Efficient Market Hypothesis (EMH) is the absence of auto-correlation of the return series of the financial prices and the exclusion of excess profitability made by any (active) trading strategy. However, the precondition for the validity of EMH, which assumes that all market participants can promptly receive and rationally react to the relevant information affecting the prices, might be (approximately) true for a long time horizon, but not for a short time horizon. By examining local long-range dependence (measured by the rolling Rescaled Range estimates of the Hurst index) of an empirical example, the local market inefficiency is inferred, and excess profitability of a simple trend-following trading strategies implies the potential for constructing a more profitable trading system by incorporating the former into the latter.

Validity of efficient market hypothesis: Evidence from UK mutual funds

This research is geared towards analysing performance of the fund managers and their market timing abilities. For the purpose of this study, sample of 50 U.K. mutual funds were selected in random. Their returns from the beginning of 1990 to the end of 2008 were used for hypotheses testing. Financial Times All Share Index was taken as a benchmark. Two widely accepted performance measurement techniques were employed, that is, Jensen alpha measure and Treynor and Mazuy market timing hypothesis. Based on the results, it is concluded that the fund managers lacked the ability to predict the market movement on consistent bases. They were unable to outperform the market or in simple words, they could not “beat the market”. Any chance of outperforming the market is merely a random chance and this cannot be done on consistent bases. An interesting thing to note is that fund managers also lacked market timing abilities which supports the efficient market hypothesis proposed by Fama. Present research has strong implications for existing and potential fund managers and individual investors in terms of measuring the performance of mutual funds. Key words: Efficient market hypothesis, Jensen alpha, Treynor and Mazuy, gamma measure, market timing ability.

DETEKSI PERBANDINGAN EKSES VOLATILITAS HARGA SERTA REAKSI EARNING TERHADAP RETURN & HARGA SAHAM SEKTOR LQ45

This paper examines the validity of Efficient Market Hypothesis (EMH) valuation model through stock price volatility and earning volatility excesses. Our research also analyzes stock price reaction to earning. Based on existence of stock price mispricing; there is no investor who will obtain abnormal return if we follow EMH. We find JS is not efficient. Over the observation periods; investors have more concerned with stock market volatility than earning quality. Specifically they have remained to concern about earning quality from LQ 45 companies. Our study provides stock price prediction model that used by investors for decision to buy and to sell. The base for decision of investors is earning. When earning is positive; investors should hold that stock. Otherwise they should release if their earning of stock are negative.Keywords: stock price and earning volatility excesses; mispricing; efficient market,. abnormal return.