Variance Ratio Test Research Articles

Covid-19 and informational efficiency in Asian emerging markets: a comparative study of conventional and Shariah-compliant stocks

PurposeThis study aims to provide a comparative insight into the level of informational efficiency and irregularities of Shariah-compliant stocks and conventional stocks in three emerging markets, namely, China, Malaysia and Pakistan. The empirical evidence is provided for pre-crisis and crisis periods caused by the Covid-19 pandemic.Design/methodology/approachInformational efficiency is measured using the variance ratio (VR) Test developed by Kim (2006). The Approximate Entropy (ApEn) Metrics is used to investigate the level of irregularities in stock prices caused by the pandemic.FindingsAll the three emerging markets in the sample are not immune to the crisis caused by Covid-19 pandemic. The level of informational efficiency of both the Shariah-compliant and conventional stock is affected by the crisis. However, the former exhibits relatively high level of informational efficiency and stability in returns as compared to more volatility of conventional stocks.Practical implicationsThis study provides market agents and policy makers with a robust assessment of the impact of the Covid-19 pandemic on informational efficiency of Shariah-compliant and conventional stocks. Relatively high informational efficiency of Shariah-compliant stocks indicates that they are more transparent and that investors can trust the Shariah-compliant stocks more. This higher level of transparency and trust leads to more steady returns and lower levels of risk even during turbulent time like Covid-19. Investors can gain superior returns by conducting fundamental analysis and investing in index funds.Originality/valueTo the best of the authors’ knowledge, this is the first study that highlights the difference in informational efficiency of conventional stocks and Shariah-compliant stocks in the crisis period caused by Covid-19. Unlike previous studies, this study uses firm level data which enables firm-wise assessment of informational efficiency.

Market efficiency and global issues: A case of Indonesia

The efficient market hypothesis assumes that the stock prices fully reflect all relevant information. Under the weak form, the future prices are independent of current prices or in the other words, they follow the random walk hypothesis. Global issues tend to have an impact on capital markets around the world. Therefore, the objective of this study is to assess the effect of global issues on the movements of expected returns in the Indonesian capital market from January 1, 2022, to June 30, 2022. The sample of 755 listed firms is used to test whether the expected returns have a random pattern during the observation period. The results of runs tests and variance ratio test show that the expected return movements are not random. On those results, the weak form of the efficient market hypothesis is rejected, and it can be concluded that the capital market in Indonesia for this period is inefficient. The findings of this study imply that the information about global issues does not affect the market. The success of the Indonesian government’s strategy in dealing with global issues (including the Covid-19 pandemic) in the form of a vaccination program and also followed by excellent fiscal and monetary policies has led to more predictable returns in the capital market. Moreover, investors can set their portfolios to get extraordinary returns as the market is more predictable.

Weak Form Market Efficiency in Nepalese Stock Market Indices

This paper analyses the weak-form market efficiency of the Nepalese stock market based on daily observation from Jan 23, 2019 to Jan 20, 2021, regarding returns of NEPSE, the composite index of Nepalese stock market, returns of banking sub-index and returns of manufacturing and processing sub-index. The study is conducted employing five tests of random walk i.e. Normality tests, Runs test, Autocorrelation functional test, Unit root test, and Variance ratio test. All tests produced consistent results except for the banking sub-index and manufacturing and production sub-index under variance ratio test and run test. It is concluded that the Nepalese stock market is not in weak-form market efficiency. The assumptions of an efficient stock market may not be materialized in the Nepalese context being a small and young market. The findings of the study report that investors have a favorable opportunity to predict stock price and generate abnormal gain from the Nepalese stock market.

Random Walk of Socially Responsible Investment in Emerging Market

Emerging markets offer some of the world’s most impactful investment possibilities for investors concerned with addressing global climate and socioeconomic issues. Sophisticated investors conjectured that socially responsible investment (SRI) or environmental social and governance (ESG) might give greater returns than investing in conventional stocks in an emerging market. At the same time, the investors favour conserving the environment while generating long-term economic growth. Being able to earn greater returns is an indication of an inefficient market. This paper investigates the random walk (weak-form of the efficient market) of SRI/ESG indices in the emerging market (based on IMF emerging market criteria). We use the daily data as a sample. Random walk is tested using an Augmented Dickey–Fuller (ADF) Unit Root test, Variance ratio test and Hurst exponent test. The findings report that all the indices are not following a random walk. Lack of ESG disclosure, inadequate corporate governance regulation and behavioural bias might be reasons for market inefficiency. Its implications for investors to reap abnormal market returns by identifying the undervalued stock in the emerging economies. The regulator’s approval of operational guidelines and the licensing of exchanges and clearing houses help maintain the markets’ fairness. Then, the regulator should intensify corporate governance enhancement, implementation and enforcement continuously; enhance the market and institutional infrastructure, and focus policy on encouraging a more significant and more diverse investor base.

The overall and time-varying efficiency test for the carbon market in China

This paper analyzes the overall and time-varying efficiency of China's carbon market, which is crucial for carbon risk management and policymaking. Due to the severe illiquidity problems other pilots face, we first select Shenzhen, Guangdong, and Hubei pilots out of the eight carbon pilots for our study based on the statistical analysis. We then test the overall efficiency of the markets using the LM, CD, and Wild-Bootstrap variance ratio test. The sliding window method is combined with the above three variance ratio test methods to validate the time-varying efficiency. The results prove that the overall efficiency of the three carbon pilots has not yet reached a weak form. And we observe that the short-term efficiency is time-varying and may be weak-form. The study further found Hubei to be the most efficient carbon pilot, followed by Guangdong and Shenzhen. Finally, this paper conducts a qualitative analysis on the low efficiency from five aspects namely carbon trading rules, market liquidity, price volatility, trading volume, and types of trading products. Several conclusions and recommendations are proposed for policymakers and investors.

Efficient Market Hypothesis for Malaysian Extreme Stock Return: Peaks Over A Threshold Method

This paper presents investigation on the efficient market hypothesis of extreme stock return based on peaks over threshold method, by application of 10% Value at risk (VaR) quantile threshold level. The efficient market hypothesis (EMH) in the stock market index is validated by utilising autocorrelation, Kwiatkowski Phillips Schmidt Shin (KPSS), and variance ratio tests. The tests constituted of daily, extreme maximum and minimum, and three sub-periods data reflecting different economic condition in the market. Results indicated the strong influences of the financial crisis in the series movement. Mixed evidences were acquired; nonetheless, the overall results show that the Malaysia extreme stock return does not follow a random walk, only the series during the crisis and recovery period are in weak-form market efficiency.

61 Comparison of Clinical Outcomes of Robotic Versus Open Pancreaticoduodenectomy Using a New ‘Therapeutic Index’ Tool for Quality Assessment of Surgery: A Systematic Review and Meta-Regression Analysis

Abstract Aim Pancreaticoduodenectomy (PD) is a challenging procedure with peri-operative complications. Robotic surgery offers improved dexterity, visibility, and accessibility. Recently, many centres have reported improved clinical outcomes for robotic PD. We reviewed the safety and efficacy of robotic PD in comparison to open PD using ‘Therapeutic Index’ (TI). Method A systematic review of the literature was conducted in various databases. Articles published between January 2010 and March 2021 reporting totally-robotic and open PD were included, according to PRISMA guidelines. The Cochrane tool was used for risk of bias assessment. We compared 30-day mortality rates (MR30), lymphadenectomy rates (LR), R0 resection rates (R0RR) and therapeutic index (TI). STATA 16.1 was used for statistical analysis. Results The four studies that met inclusion criteria included 5090 PDs, out of which 617 were totally robotic (RPD) and 4473 were open (OPD). Variance ratio tests demonstrated a) Higher TI for RPD versus OPD (1807.42 vs 1723.37, p=0.86), b) Significantly smaller MR30 (2.50 vs 19.00, p=0.0004), c) Significantly lower R0RR (130.50 vs 939.25, p=0.00) and d) No significant difference in LR between RPD and OPD (35.63 vs 38.25, p=0.81). Meta-regression analysis showed a significantly higher TI coefficient of RPD than OPD (0.66 vs -0.40, p=0.08, α=0.1). Conclusions Our study suggests that robotic PD is safe and not inferior to open PD and our analysis RPD demonstrated a higher therapeutic index than OPD. Randomised controlled trials are required to establish the efficacy of robotic PD. Also, standardisation of reporting mortality, survival and oncological outcomes is needed for the effective calculation of TI.

Carbon Market Evaluation Based on Random Walk Hypothesis in China

According to the proposal of Kyoto protocol, carbon dioxide emission rights are traded as a commodity, and carbon emission trading market emerges as the times require. As the world’s largest carbon emitter, China has established eight pilot markets for carbon emission trading. Selecting the closing price of eight carbon trading markets from the establishment to June 23, 2020, this paper analyzes the daily, weekly, and monthly return series data, using the first-order autoregressive process to adjust the daily income series to eliminate the weak trading market effect and then comprehensively uses the traditional variance ratio test and multiple variance ratio test to analyze the weak-form market efficiency of the eight carbon trading markets. The empirical results show that most of the carbon trading markets are non-weak-form market efficiency, and only Tianjin, Shanghai, and Hubei markets are weak-form market efficiency under the daily trading data. However, with the increase of carbon holding period, the weak-form market efficiency continues to strengthen. It shows that liquidity, quantity, and information transparency are important factors that affect the market efficiency.

Stock Market Efficiency and COVID-19 with Multiple Structural Breaks: Evidence from India

The objective of the study is to investigate the influence of the coronavirus pandemic (endogenous crisis) on the stock market efficiency of India during the multiple break periods. The empirical analysis is performed using conditional heteroscedasticity and a small sample robust wild bootstrap automatic variance ratio test and automatic portmanteau test on a daily stock return data of two benchmark indices, that is, NIFTY and SENSEX. The empirical results demonstrate that the stock return of two indices deviates from market efficiency during some periods of the analysis, notably during the nationwide lockdown and peak periods of coronavirus cases in India. These findings indicate that changing stock market behaviour becomes more speculative and earns abnormal profits. To the best of the author’s knowledge, this study provides the first evidence of investigating the variations in the stock market efficiency of India in response to this endogenous crisis.

Efficient Market Testing of the Chinese Stock Market During the COVID-19 Recession

Purpose – The purpose of this paper is exploring whether Chinese stock market (SSEC) is effective during the COVID-19 recession. Recent asset market bubbles and bursts have generated interest in the efficiency of stock market behavior. Efficient market hypothesis (EMH) has been challenged by the COVID-19 recession.
 Design/Methodology/Approach – Based on Efficient market hypothesis, this research will present results of nonparametric tests employed in an econometric investigation of stock market efficiency in China during COVID-19 recession. To test this hypothesis, the Augmented Dickey-Fuller (ADF) test, Autocorrelation Function (ACF) test, Runs test, and Variance Ratio Test were used to assess the behavior of the SSEC.
 Findings – This paper studies the Chinese stock market’s (SSEC) behavior passed weak form efficient market tests for random walk. According to Variance Ratio Test, a certain group of SSEC investors could experience abnormal returns since there is a possibility that they could know something about a shock that is not already reflected in the stock's price.
 Research Implications – In the management of this paper, this study will provide help for stock market investors when investing or provide reference significance for the state to manage the stock market.

Efficiency in the market for listed European football clubs

PurposeThe purpose of this paper is to test the weak-form efficiency of listed European football stocks in the sample period 2012–2020.Design/methodology/approachThree powerful tests for randomness are performed, that is, autocorrelation of returns analysis via the Ljung and Box (1978) test, variance ratio test by Lo and MacKinlay (1988) and runs test (Wald and Wolfowitz, 1940).FindingsResults are mixed. Autocorrelation analysis and variance ratio test reject the random walk hypothesis and are, therefore, in line with the findings of Ferreira et al. (2017). In contrast, the runs test only leads to rejection of the random walk hypothesis for five out of 20 football stocks. Interestingly, this applies to shares with the lowest trading volume.Practical implicationsThe market for stakes in football clubs can be expected to continue to grow in the future. Thus, the issue whether the price signals derived from listed football clubs are reliable inputs when negotiating the price for a football club stake in a private transaction is of increasing importance.Originality/valueThis study complements, and partly challenges, the results of Ferreira et al. (2017), the only other study in this field, by applying other methods and analyzing a more recent sample period.

Testing of Random Walk Hypothesis in the Cryptocurrency Market

Cryptocurrency as a financial asset has emerged as a fad among investors, academicians and policymakers alike. In a financial purview, this study intends to empirically test the behaviour of the cryptocurrency return, inferring its market efficiency. For this purpose, daily data of five cryptocurrencies (Bitcoin, Ethereum, Litecoin, Tether and Ripple) have been collected from 1 January 2016 to 31 March 2021 to investigate the well-known financial theory of random walk hypothesis for this young market. To provide statistical evidence and ensure the robustness of results, analysis is performed using the variance ratio test, augmented Dickey–Fuller test, Philip–Perron test, Breusch–Godfrey serial correlation LM test and ARIMA model. The statistical results illustrated strong evidence refuting the presence of the random walk hypothesis in this emerging market, thus implying inefficiency in the cryptocurrency market. Furthermore, the absence of random walk in the cryptocurrency makes this financial asset predictable, giving investors an arbitrage edge to earn abnormal gains using trading strategies, which is euphoria.

Testing and Determining the Form of Market Efficiency in Dhaka Stock Exchange (DSE)

This paper is focused on the idea of whether Dhaka Stock Market (DSM) is efficient in weak-form of Efficient Market Hypothesis (EMH) or not. As any country’s economic condition can be indicated by the efficiency of its stock market, so determining and measuring the different forms of efficiency has always been a well explored topic for researchers. In this paper, attempts have been made to determine and test the market efficiency and randomness of Dhaka Stock Exchange (DSE) in weak form. The entire Dhaka stock exchange has been evaluated by employing daily return from the two indices- DS30 and DSEX. Employing the normality test it is found that both the return series are not normally distributed. Moreover few parametric tests named Augmented Dickey-Fuller test (ADF), Autocorrelation Function (ACF), and Variance Ratio test (Lo & MacKinlay) have been done to examine the historic price dependencies or to examine the random walk hypothesis. The entire test results suggested that DSE is not efficient in weak form which means return from DSE does not follow a random walk.

Non-parametric seasonal unit root tests under periodic non-stationary volatility.

This paper presents a new non-parametric seasonal unit root testing framework that is robust to periodic non-stationary volatility in innovation variance by making an extension to the fractional seasonal variance ratio unit root tests of Eroğlu et al. (Econ Lett 167:75–80, 2018). The setup allows for both periodic heteroskedasticity structure of Burridge and Taylar (J Econ 104(1):91–117, 2001) and non-stationary volatility structure of Cavaliere and Taylor (Econ Theory 24(1):43-71, 2008). We show that the limiting null distributions of the variance ratio tests depend on nuisance parameters derived from the underlying volatility process. Monte Carlo simulations show that the standard variance ratio tests can be substantially oversized in the presence of such effects. Consequently, we propose wild bootstrap implementations of the variance ratio tests. Wild bootstrap resampling schemes are shown to deliver asymptotically pivotal inference. The simulation evidence depicts that the proposed bootstrap tests perform well in practice and essentially correct the size problems observed in the standard fractional seasonal variance ratio tests, even under extreme patterns of heteroskedasticity.Supplementary InformationThe online version contains supplementary material available at 10.1007/s00180-022-01211-w.

The Impact of the COVID-19 Outbreak on the Weak-Form Informational Efficiency of the Warsaw Stock Exchange

The aim of this paper is to verify whether the COVID-19 outbreak negatively affected the weak-form informational efficiency of the Warsaw Stock Exchange (WSE). Applying a wild bootstrapped automatic variance ratio test and the rolling window methodology, we verify the martingale hypothesis for daily returns of 437 stocks listed on the Main Market of the WSE i n a research period beginning on January 2nd, 2015 and ending on August 31st, 2020. The percentage of cases in which the martingale hypothesis cannot be rejected is our proxy for the weak-form informational efficiency that we come up with. Despite the rapid and significant price movements, as well as the rise of returns volatility (and thus a likely herd behavior of the market participants), the results obtained do not allow for stating unambiguously that the COVID-19 outbreak negatively affected the weak-form informational efficiency of the WSE. The results turned out to be sector-dependent. Future issue-related studies can apply other proxies of efficiency levels as a unique proxy applied in this study is based only on a wild bootstrapped automatic variance ratio test. The issue-related studies should be also continued as the pandemic is still an ongoing issue. This study comes up with a novel approach to approximating the weak-form informational efficiency, provides regulators, as well as other market participants with valuable information on the WSE efficiency changes in the COVID-19 pandemic times and even its long-term trends.

The Chinese Government Bond Markets: Foreign Investments and Market Efficiency

The Chinese bond market is the world’s second largest, with government bonds accounting for the majority of the market. The Chinese government has been gradually opening up its bond markets to foreign investors since 2015. However, studies on the Chinese bond markets are very few. Based on data of most frequently traded government bonds in 2015 and 2019, statistical tests including Ken-tau tests and variance ratio tests show that while Chinese government bond markets were generally not efficient in 2015, the efficiency has significantly improved in 2019. The change of market efficiency is likely from the increasing foreign investments, thus a more diverse investor base of the Chinese government bonds. Some structural issues remain such as immature derivative market, low marketization of commercial banks, and restrictions to foreign investors. Finally, this study discusses the implications for investors, policymakers and academics.

Changes in Australian community perceptions of non-communicable disease prevention: a greater role for government?

BackgroundMonitoring trends in community opinion can identify critical opportunities to implement upstream health policies or interventions. Our study examines change and demographic modifiers of change in community perceptions of government intervention for prevention of lifestyle-related chronic disease across two time points in Australia.MethodsData were drawn from the 2016 (n = 2052) and 2018 (n = 2601) waves of a nationally representative cross-sectional telephone survey, ‘AUSPOPS’. Survey questions gauged perceptions of government intervention for health in general, peoples’/organizations’ role in maintaining health (e.g., parents, government) and support for specific health interventions (e.g., taxing soft drink).Bivariate and multivariate regression models tested for change between the two surveys, adjusted for demographic characteristics. Models with interactions between survey wave and demographic variables tested for differential change. One-tailed variance ratio tests examined whether opinions had become more polarized in 2018 compared with 2016.ResultsThe large, significant increase observed in the perceived size of the role that government has in maintaining people’s health was uniform across demographic subpopulations. The role for employers and private health insurers was also perceived to be larger in 2018 compared with 2016, but the degree of change varied by gender, age and/or socioeconomic status. Support for some government interventions (e.g., taxing soft drinks) increased among specific demographic subgroups whilst exhibiting no overall change. Opinion was more polarized on general attitudes to government intervention for population health in 2018 compared to 2016, despite little change in central tendency.ConclusionsOpportunities may exist to implement government health-promoting policies (e.g., taxing soft drinks), although advocacy may be needed to address the concerns of less supportive subpopulations. Attitudes on government intervention in general may be becoming more polarized; future research examining the association of such changes with exposure to different information sources could inform communication strategies for future health policy change.

Adaptive market hypothesis: An empirical analysis of the Wine Market

We test the nature of weak form informational efficiency present in the wine market using daily return of LIV-EX 50 index from 1/1/2010 to 12/6/2020. First, we employ a number of statistical tests including variance ratio tests, tests for linear and non-linear dependence and Hurst coefficient. The tests are applied on the full dataset and on four non overlapping sub-samples of equal length. The variance ratio tests provide a mixed regarding informational efficiency. Evidence of non-linear dependence in the return series was found. The Hurst coefficient values confirm the presence of long run persistence in the wine market. Based on the mixed evidence, we test the possibility of adaptive nature of the wine market. We employ the newly proposed Adaptive Index (AI) to quantify the degree of information inefficiency in the wine market at any instance. Our results confirm that wine market is adaptive and periodically shifts between states of efficiency and inefficiency. The wine market is found to be relatively free from the Covid-19 induced shock and the safe haven property of wine is thus confirmed. Finally, impact of various macroeconomic and financial events on wine market efficiency is identified by using AI.

A Comparative Study on the Efficiency of Korean Stock Markets: KOSPI and KOSDAQ

Purpose - This study aims to examine and compare the weak-form efficiency of the KOSPI and KOSDAQ markets in Korea based upon the random walk process framework. Design/Methodology/Approach - This study uses multiple variance ratio tests with the purpose of testing the random walk process for daily returns of stocks to investigate the efficiency of stock markets in Korea. Chow-Denning and Richardson-Smith multiple variance ratio tests have been employed in order to find out the level of the efficiency of Korea’s stock markets. Findings - First, the daily return of both market indexes did not follow the random walk process for the sampling period, indicating that the Korean stock market indexes are not weak-form efficient. Second, all the individual stocks used for the analysis are shown to be inefficient in the weak form. Only three sample stocks in KOSPI market out of ten stocks accept the null hypothesis under the heteroscedasticity assumption, but the null hypothesis in these stocks is rejected under the homoscedasticity assumption. Research Implications - This study suggests that under the random walk hypothesis framework, the market index and individual stocks in Korean stock market show the informational inefficiency in a weak form. Accordingly, it seems that domestic and foreign investors may still be able to get the yield better than market average, or market index, in the Korea’s stock markets including KOSDAQ market by doing fundamental and technical analysis on the stock markets.

On Exchange Rate Predictability and Adaptive Market Hypothesis in South Africa

ABSTRACT This study sets out to explore the predictability of global foreign exchange rates vis-à-vis the South African rand using daily nominal exchange rates from January 2010 to February 2018. The estimation techniques include automatic portmanteau test, wild bootstrap variance ratio test, Dominguez–Lobato test for martingale difference hypothesis, and generalized spectral tests. We investigate the time-varying predictability by employing the fixed-length rolling window approach. The full sample results indicate significant predictability of some exchange rates while some suggest no predictability. The rolling window approach established that all the foreign exchange markets go through episodes of significant predictability and episodes of unpredictability. The currency investment space is dynamic and that makes it imperative for market participants to be adaptable.