scholarly journals Collective dynamics of stock market efficiency

2020 ◽  
Vol 10 (1) ◽  
Author(s):  
Luiz G. A. Alves ◽  
Higor Y. D. Sigaki ◽  
Matjaž Perc ◽  
Haroldo V. Ribeiro
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Stock Prices ◽  
Stock Markets ◽  
Time Windows ◽  
Efficient Market Hypothesis ◽  
Permutation Entropy ◽  
Informational Efficiency ◽  
Stock Market Efficiency ◽  
High Level

AbstractSummarized by the efficient market hypothesis, the idea that stock prices fully reflect all available information is always confronted with the behavior of real-world markets. While there is plenty of evidence indicating and quantifying the efficiency of stock markets, most studies assume this efficiency to be constant over time so that its dynamical and collective aspects remain poorly understood. Here we define the time-varying efficiency of stock markets by calculating the permutation entropy within sliding time-windows of log-returns of stock market indices. We show that major world stock markets can be hierarchically classified into several groups that display similar long-term efficiency profiles. However, we also show that efficiency ranks and clusters of markets with similar trends are only stable for a few months at a time. We thus propose a network representation of stock markets that aggregates their short-term efficiency patterns into a global and coherent picture. We find this financial network to be strongly entangled while also having a modular structure that consists of two distinct groups of stock markets. Our results suggest that stock market efficiency is a collective phenomenon that can drive its operation at a high level of informational efficiency, but also places the entire system under risk of failure.

scholarly journals Stock Market Efficiency in the Time of COVID-19: Evidence from Industry Stock Returns

2020 ◽  
Vol 5 (2) ◽  
pp. 40-44
Author(s):  
Vaibhav Lalwani ◽  
Vedprakash Vasantrao Meshram
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Stock Returns ◽  
Stock Prices ◽  
Statistical Tests ◽  
Jel Classification ◽  
Informational Efficiency ◽  
Classification Code ◽  
Stock Market Efficiency

Using industry portfolios as test assets and a battery of statistical tests, we study if the informational efficiency of stock prices has declined after the COVID-19 crisis began. The results suggest that the predictability of stock returns in some industries has increased during the COVID-19 period. Markets appear to have become less informationally efficient during the COVID-19 crisis. JEL Classification Code: C58, G01, G10, G14.

Stock prices' long memory in China and the United States

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zhengxun Tan ◽  
Yao Fu ◽  
Hong Cheng ◽  
Juan Liu
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Long Memory ◽  
Stock Markets ◽  
Information Disclosure ◽  
Structural Breaks ◽  
Efficient Market Hypothesis ◽  
The United States ◽  
Chinese Stock Market ◽  
Content Type

PurposeThis study aims to examine the long memory as well as the effect of structural breaks in the US and the Chinese stock markets. More importantly, it further explores possible causes of the differences in long memory between these two stock markets.Design/methodology/approachThe authors employ various methods to estimate the memory parameters, including the modified R/S, averaged periodogram, Lagrange multiplier, local Whittle and exact local Whittle estimations.FindingsChina's two stock markets exhibit long memory, whereas the two US markets do not. Furthermore, long memory is robust in Chinese markets even when we test break-adjusted data. The Chinese stock market does not meet the efficient market hypothesis (EMHs), including the efficiency of information disclosure, regulations and supervision, investors' behavior, and trading mechanisms. Therefore, its stock prices' sluggish response to information leads to momentum effects and long memory.Originality/valueThe authors elaborately illustrate how long memory develops by analyzing not only stock market indices but also typical individual stocks in both the emerging China and the developed US, which diversifies the EMH with wider international stylized facts and findings when compared with previous literature. A couple of tests conducted to analyze structural break effects and spurious long memory demonstrate the reliability of the results. The authors’ findings have significant implications for investors and policymakers worldwide.

Relevance and evolution of adaptive markets hypothesis: a review

2016 ◽  
Vol 8 (3) ◽  
pp. 166-179 ◽  
Author(s):  
Raj S. Dhankar ◽  
Devesh Shankar
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Design Methodology ◽  
Efficient Market Hypothesis ◽  
Efficient Markets ◽  
Informational Efficiency ◽  
Market Behavior ◽  
Efficient Market ◽  
Content Type ◽  
Dynamic Perspective

Purpose The purpose of this paper is to discuss the relevance and evolution of adaptive markets hypothesis (AMH) that has gained traction in the recent years, as it provides a dynamic perspective to the concept of informational efficiency. Design/methodology/approach This paper discusses several issues related to the concept of informationally efficient markets that have indicated efficient market hypothesis to be an incomplete portrayal of stock market behavior. Findings The authors find that a strict and perpetual adherence to informational efficiency is highly unlikely, and AMH provides a much more plausible description of the behavior of stock markets. Originality/value The authors provide a description of studies that examine the testable implications of AMH.

An analysis of stock market efficiency: Developed vs Islamic stock markets using MF-DFA

2014 ◽  
Vol 407 ◽  
pp. 86-99 ◽  
Author(s):  
Syed Aun R. Rizvi ◽  
Ginanjar Dewandaru ◽  
Obiyathulla I. Bacha ◽  
Mansur Masih
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Stock Markets ◽  
Stock Market Efficiency

International stock market efficiency and integration

2015 ◽  
Vol 12 (2) ◽  
pp. 88-106 ◽  
Author(s):  
Neha Seth ◽  
A. K. Sharma
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Market Efficiency ◽  
Stock Markets ◽  
Research Work ◽  
Abnormal Returns ◽  
Content Type ◽  
Stock Market Efficiency ◽  
Recent Financial Crisis ◽  
The Impact

Purpose – The purpose of this paper is to examine the informational efficiency and integration simultaneously for select Asian and US stock markets while considering the impact of recent financial crisis. Design/methodology/approach – Daily stock market data from 13 world markets covering the period of ten years (from January 1, 2000 to December 31, 2010) is tested using Run test, Unit root test, GARCH(1, 1) model, Pearson correlation coefficient, Johansen’s cointegration test and Granger causality test. Findings – It is concluded that the markets under study are inefficient in weak form which creates the chances of earning abnormal returns for the investors. Furthermore, the markets are found to be correlated and integrated in long-run, which makes the international fund diversification insignificant. The degree of inefficiency, in general, is not affected by the recent financial crisis but the level of integration among stock markets is reduced with the effect of recent financial crisis. Practical implications – Individual/institutional investors, portfolio managers, corporate executives, policy makers and practitioners may draw meaningful conclusions from the findings of this type of researches while operating in stock markets. They can use such studies for the management of their existing portfolios as their portfolio management strategies may be, up to some extent, dependent upon such research work. Originality/value – The originality of the present study lies in the fact that this paper is an attempt to fill the time gap of comprehensive researches on Asian and US markets and an effort to test stock market efficiency and integration simultaneously.

FINANCIAL LIBERALIZATION AND STOCK MARKET EFFICIENCY: MEASURING THE THRESHOLD EFFECTS OF GOVERNANCE

2018 ◽  
Vol 13 (04) ◽  
pp. 1850016
Author(s):  
NAVAZ NAGHAVI ◽  
MUHAMMAD SHUJAAT MUBARIK ◽  
DEVINDER KAUR
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Financial Liberalization ◽  
Institutional Development ◽  
Threshold Level ◽  
Threshold Effect ◽  
Informational Efficiency ◽  
Positive Effects ◽  
Stock Market Efficiency ◽  
The Impact

This study takes the initiative to make a link between empirical aspect of an economy and theoretical part of it. Investigating econometric findings, the current study has taken advantages of profound analytical discussions to justify which school of thought describe liberalization phenomena and its relevant side effects. This paper presents an investigation into the effects of financial openness on stock market efficiency in emerging markets after controlling for certain level of institutional development. The results demonstrate that there is a threshold effect in the liberalization–efficiency relationship. Specifically, we found that the impact of financial liberalization on informational efficiency of the stock market was positive and significant only after a certain threshold level of institutional development had been attained. Below this level, the effect of financial liberalization on stock market efficiency was negative. This finding suggests that the positive effects of financial liberalization on informational efficiency are contingent on the level of institutional development, thus supporting the idea that financial liberalization embedded within a sound institutional framework has the capacity to enhance stock market efficiency. The conclusion that the governance concept, emphasized in econometric findings, is implicit in the definition of neoliberalism can be considered as one of the contributions of the study.

Stock market efficiency: A comparative analysis of Islamic and conventional stock markets

2018 ◽  
Vol 503 ◽  
pp. 139-153 ◽  
Author(s):  
Sajid Ali ◽  
Syed Jawad Hussain Shahzad ◽  
Naveed Raza ◽  
Khamis Hamed Al-Yahyaee
Keyword(s):  
Comparative Analysis ◽  
Stock Market ◽  
Market Efficiency ◽  
Stock Markets ◽  
Stock Market Efficiency

scholarly journals Granger Causality between Stock Market and Macroeconomic Indicators: Evidence from Germany

2016 ◽  
Vol 64 (6) ◽  
pp. 2101-2108 ◽  
Author(s):  
Tomáš Plíhal
Keyword(s):  
Interest Rate ◽  
Stock Market ◽  
Granger Causality ◽  
Money Supply ◽  
Industrial Production ◽  
Stock Prices ◽  
Efficient Market Hypothesis ◽  
Bivariate Analysis ◽  
Informational Efficiency ◽  
Macroeconomic Indicators

The aim of this paper is to investigate informational efficiency of the stock market in Germany. Granger causality between the stock market and the selected macroeconomic variables is investigated by bivariate analysis using Toda-Yamamoto (1995) approach. This study focuses on monthly data from January 1999 to September 2015, and the stock market is represented by blue chip stock market index DAX. Investigated macroeconomic indicators include industrial production, inflation, money supply, interest rate, trade balance and exchange rate. Stock market Granger-causes industrial production and interest rate, and is therefore leading indicator of these variables. Between money supply and stock prices is Granger causality in both directions. Other variables seem to be independent on development of the stock market. We do not find any violation of Efficient market hypothesis which indicates that the stock market in Germany is informational efficient.

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