TESTING FOR THE EFFICIENT MARKET HYPOTHESIS IN STOCK PRICES: INTERNATIONAL EVIDENCE FROM NONLINEAR HETEROGENEOUS PANELS

2013 ◽  
Vol 18 (4) ◽  
pp. 943-958 ◽  
Author(s):  
Chien-Chiang Lee ◽  
Ching-Chuan Tsong ◽  
Cheng-Feng Lee
Keyword(s):  
Unit Root ◽  
Stock Prices ◽  
Stock Price ◽  
Unit Root Test ◽  
Efficient Market Hypothesis ◽  
Global Scale ◽  
Order Zero ◽  
Efficient Market ◽  
Modeling And Forecasting ◽  
International Data

Using international data, this paper explores whether the efficient market hypothesis for real stock prices is supported for different panels. The stationarity of a real stock price has important implications for modeling and forecasting financial activities. On a global scale, we implement the recently developed nonlinear heterogeneous panel unit root test, which allows us to account for possible nonlinearity and cross-section dependence and to identify how many and which countries of the panel contain a unit root. The primary conclusion is that the stationarity of real stock prices varies between regions and levels of economic development. Overall, our empirical results illustrate that real stock prices in these countries are a mixture of stationary (integrated of order zero) and nonstationary (integrated of order one) processes.

THE EFFICIENT MARKET HYPOTHESIS REVISITED: EVIDENCE FROM THE FIVE SMALL OPEN ASEAN STOCK MARKETS

2012 ◽  
Vol 57 (03) ◽  
pp. 1250021 ◽  
Author(s):  
QAISER MUNIR ◽  
KOK SOOK CHING ◽  
FUMITAKA FUROUKA ◽  
KASIM MANSUR
Keyword(s):  
Stock Returns ◽  
Unit Root ◽  
Stock Prices ◽  
Stock Price ◽  
Efficient Market Hypothesis ◽  
Linear Series ◽  
Efficient Market ◽  
Threshold Autoregressive ◽  
Non Linear ◽  
Unit Root Process

The efficient market hypothesis (EMH), which suggests that returns of a stock market are unpredictable from historical price changes, is satisfied when stock prices are characterized by a random walk (unit root) process. A finding of unit root implies that stock returns cannot be predicted. This paper investigates the stock prices behavior of five ASEAN (Association of Southeast Asian Nations) countries i.e., Indonesia, Malaysia, Philippines, Singapore and Thailand, for the period from 1990:1 to 2009:1 using a two-regime threshold autoregressive (TAR) approach which allows testing nonlinearity and non-stationarity simultaneously. Among the main findings, our results indicate that stock prices of Malaysia and Thailand are a non-linear series and are characterized by a unit root process, consistent with the EMH. Furthermore, we find that stock prices of Indonesia, Philippines and Singapore follow a non-linear series, however, stock price indices are stationary processes that are inconsistent with the EMH.

An Empirical Study on Efficient Market Hypothesis with reference to FMCG Sector

GIS Business ◽  
2020 ◽  
Vol 15 (1) ◽  
pp. 109-126
Author(s):  
Nitin Tanted ◽  
Prashant Mistry
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Abnormal Returns ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Controversial Issues ◽  
Efficient Market ◽  
Price Movements ◽  
Run Test ◽  
Stock Price Movements

One of the highly controversial issues in the area of finance is “Efficient Market Hypothesis”. Efficient Market Hypothesis states that, “In an efficient market, all available price information is reflected in the stock prices and it is not possible to generate abnormal returns compared to other investors.” A lot of studies conducted previouslyto test the Efficient Market Hypothesis, confirmed the theory until recent years, when some academicians found it to be non-applicable in financial markets. According to them, it is possible to forecast the stock price movements using Technical Analysis. The results of various studies have been inconclusive and indefinite about the issue. This study attempted to test the efficiency of FMCG Sector stocks in India in its weak form. For the study, closing prices of top 10 stocks from Nifty FMCG index has been taken for the 5-year period ranging from 1st October 2014 to 30th September 2019. Wald-Wolfowitz Run test has been used to test the haphazard movements in the stock price movements. The results indicated that FMCG sector stocks does support the Efficient Market Hypothesis and exhibit efficiency in its weak form. Hence, it is not possible to accurately predict the price movements of these stocks.

scholarly journals Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations

2020 ◽  
pp. 1-13
Keyword(s):  
Stock Market ◽  
Stock Price ◽  
Stock Exchange ◽  
Unit Root Test ◽  
General Meeting ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Annual Data ◽  
Efficient Market ◽  
Price Series

This study; Nigerian Stock Exchange and Efficient Market Hypothesis was done using 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.

scholarly journals Efficient Market Hypotheses Controversy and Nigerian Stock Exchange Relations

2020 ◽  
Vol 2 (1) ◽  
pp. 1-13
Author(s):  
Chukwu Agwu Ejem ◽  
Udochukwu Godfrey Ogbonna ◽  
Godwin Chigozie Okpara
Keyword(s):  
Stock Market ◽  
Stock Price ◽  
Stock Exchange ◽  
Unit Root Test ◽  
General Meeting ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Annual Data ◽  
Efficient Market ◽  
Price Series

This study; Nigerian Stock Exchange and Efficient Market Hypothesis was done using 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. JEL Classification: C1, C4, E6, G1

scholarly journals The Stock Investment Strategy at Company Acquisition

2014 ◽  
Vol 2 (3) ◽  
pp. 24-32
Author(s):  
Yu Wei Lan ◽  
Dan Lin ◽  
Lu Lin
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Abnormal Returns ◽  
Mean Reversion ◽  
Efficient Market Hypothesis ◽  
Investment Strategy ◽  
Event Studies ◽  
Security Market ◽  
Efficient Market ◽  
Market Values

Recent studies in Accounting, Industrial Organizations and Finance often incorporate efficient market hypothesis in event studies. Event studies can be used to examine how changes in company environment affect corporate finance. However, using short-term stock prices to examine mean reversion may face a problem. Specifically, there is no evidence that changes in market values are unbiased estimates of changes in fundamentals. This study adopts program trading to test the mean reversion of an acquisition event (SPIL and ASE Group) between 2015 and 2016 in Taiwan. The results show that investors can use RSI spread and stock price deviation to make abnormal returns. In other words, investors can make profits based on technical analyses. Therefore, the evidence suggests that between 2015 and 2016, the security market in Taiwan did not fully meet the condition of a semi-strong form efficient market.

scholarly journals Stock Market Reaction to COVID-19: Evidence in Customer Goods Sector with the Implication for Open Innovation

2020 ◽  
Vol 6 (4) ◽  
pp. 99
Author(s):  
Zaky Machmuddah ◽  
St. Dwiarso Utomo ◽  
Entot Suhartono ◽  
Shujahat Ali ◽  
Wajahat Ali Ghulam
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Practical Implication ◽  
Efficient Market Hypothesis ◽  
Future Research ◽  
Observation Data ◽  
Economic Sectors ◽  
Significant Difference ◽  
Before And After ◽  
Long Term Impact

The coronavirus pandemic has spread all over the world, affecting both the health and economic sectors. The aim of this research was to observe stock prices of customer goods before and after the COVID-19 pandemic using event study and the comparison test. The sample included data of daily closing stock prices and volume of stock trade during the three months before (−90 days) and after (+90 days) the occurrence of the COVID-19 pandemic ongoing, totaling 2670 observation data both before and after the COVID-19 pandemic, for a total of 5340. The research findings indicate a significant difference between the daily closing stock price and volume of stock trade before and after the COVID-19 pandemic. The current research has both theoretical and practical implications: the findings strengthen the efficient market hypothesis, which states that the more complete the provided information, the more efficient the market. The practical implication is that investors should be careful when choosing to invest. Investors should choose customer goods sector companies that provide products that are much needed by customers, for example, pharmacy, food, beverages, etc. Future research is needed to investigate the long-term impact of the pandemic on the economy.

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

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abbas Khan ◽  
Muhammad Yar Khan ◽  
Abdul Qayyum Khan ◽  
Majid Jamal Khan ◽  
Zia Ur Rahman
Keyword(s):  
Stock Prices ◽  
Arima Model ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Future Price ◽  
Short Term ◽  
Socially Responsible ◽  
Efficient Market ◽  
Content Type ◽  
The Us

Purpose By 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/approach This 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. Findings The 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/implications This 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/value This 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.

scholarly journals THE WEAK FORM MARKET EFFICIENCY IN THE MSCI ETF INDICES: CONVENTIONAL AND THE FOURIER UNIT ROOT TEST ON THE DEVELOPED AND DEVELOPING COUNTRIES

2020 ◽  
Vol 8 (4) ◽  
pp. 409-423
Author(s):  
Sümeyra GAZEL
Keyword(s):  
Developing Countries ◽  
Unit Root ◽  
Structural Break ◽  
Unit Root Test ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Developed Countries ◽  
Exchange Traded Funds ◽  
Unit Root Testing ◽  
Daily Data

In this study, weak form efficiency of the Exchange Traded Funds (ETF) in the Morgan Stanley Capital International (MSCI) Index of developed and developing countries is tested. The Fourier Unit Root test, which does not lose its predictive power in terms of structural break date, number and form, is used on daily data. Also, conventional unit root tests are used for comparison between two different tests. Analysis results indicate common findings in some countries for both unit root testing. However, the Fourier unit root test results relatively more support the assumption of efficient market hypothesis that developed countries may be more efficient than developing countries.

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