A Test of the Efficient Market Theory Using Filter Tests on Stock Prices

1975 ◽  
Vol 51 (1) ◽  
pp. 66-72 ◽  
Author(s):  
Peter Praetz ◽  
Michael Naphtali ◽  
John Nolan
Keyword(s):  
Stock Prices ◽  
Market Theory ◽  
Efficient Market ◽  
Efficient Market Theory

scholarly journals Martingales, Efficient Market Hypothesis and Kolmogorov’s Complexity Theory

2011 ◽  
Vol 2 (6) ◽  
pp. 252-258
Author(s):  
Amaresh Das
Keyword(s):  
Time Series ◽  
Financial Markets ◽  
Stock Returns ◽  
Complexity Theory ◽  
Efficient Market Hypothesis ◽  
Market Theory ◽  
Efficient Market ◽  
Price Changes ◽  
Efficient Market Theory ◽  
Theoretical Considerations

Efficient market theory states that financial markets can process information instantly. Empirical observations have challenged the stricter form of the efficient market hypothesis (EMH). These empirical observations and theoretical considerations show that price changes are difficult to predict if one starts from the time series of price changes. This paper provides an explanation in terms of algorithmic complexity theory of Kolmogorov that makes a clearer connection between the efficient market hypothesis and the unpredictable character of stock returns.

scholarly journals Food and beverage stocks responding to COVID-19

2021 ◽  
Vol 18 (3) ◽  
pp. 359-371
Author(s):  
Lai Cao Mai Phuong
Keyword(s):  
Decision Making ◽  
Event Study ◽  
Stock Prices ◽  
Policy Implications ◽  
Market Theory ◽  
The Third ◽  
First Case ◽  
Event Study Method ◽  
Food And Beverage ◽  
Efficient Market Theory

This paper investigated how food and beverage (F&B) stocks react to COVID-19. The event study method was applied to four events including the first and second events, were the first COVID-19 positive patients detected in the largest and second-largest economic center of Vietnam. The third and fourth events are related to strong measures to prevent the spread of COVID-19: the nationwide lockdown at the beginning of the second quarter of 2020, and the lockdown of Danang at the beginning of the third quarter of 2020. The results show that the reaction of F&B stock prices to events supports the semi-strong form of efficient market theory. The strong and lasting negative reaction of F&B stocks to the first event can be explained by surprise (first case in Vietnam) and Hochiminh city’s economic engine driving role in the development of Vietnam’s economy. The study finds that heuristic decision-making from nationwide lockdowns (suppression of supply chains during lockdowns) can explain the sub-sector of farming-fishing-ranching products reacted more strongly to the lockdown event in Danang. Based on the research results, this paper provides some policy implications for managers and notes for securities investors.

scholarly journals Does The Efficient Market Theory In The Weak Form Exist? Evidence From Indonesia

2021 ◽  
Vol 21 (2) ◽  
pp. 183
Author(s):  
Bram Hadianto ◽  
Hendrik Hendrik ◽  
Trishya Yuwana
Keyword(s):  
Composite Index ◽  
Weak Form ◽  
Sufficient Information ◽  
Market Theory ◽  
Efficient Market ◽  
Market Index ◽  
Efficient Market Theory ◽  
Thin Market ◽  
Efficiency Theory ◽  
Daily Returns

In the weak-form market efficiency theory, investors cannot predict the movement of all prices because of randomness. This circumstance happens because of a quick market reaction to new information. Conversely, suppose the market is not efficient in this shape; in that case, the investors can obtain an abnormal return. One of the reasons is the thin market, where many inactive stocks to be traded are available. Based on these issues, this research intends to examine this theory by employing runs testing on the daily returns of the Indonesia Composite Index (ICI) between January 2014 and December 2018 for each year and a whole. Once performing this test, this research demonstrates that the daily returns of the ICI are random for both situations. By denoting these facts, this research concludes that the capital market in Indonesia is efficient in a weak form and experiences a decrease in the thin level, reflected by the escalation in trading frequency, volume, and value, as well as the number of dynamic shares transacted. This research suggests that investors without sufficient information should utilize the service of the securities analysts to select the stocks they buy and sell to get the capital gain. Keywords – an efficient market in the weak form; market index return; runs test; thin market

Investment Perspective According to Behavioral Finance Science

2010 ◽  
Vol 16 (58) ◽  
pp. 1
Author(s):  
Sa’ad Al-Anizi
Keyword(s):  
Human Behavior ◽  
Behavioral Finance ◽  
Human Action ◽  
Security Market ◽  
Market Theory ◽  
Efficient Market ◽  
Financial Decisions ◽  
Security Markets ◽  
Efficient Market Theory ◽  
Financial Awareness

The first thing that comes to mind is the highly important question of whether there were some effects of human behavior and its fluctuations on the theories of the efficient market and the contemporary investment portfolio. According to what has been said by the proponents of these two theories; when the optimal return is realized, the efficiency of the market is achieved in terms of perfect information on prices and risk that supposed to be predetermined in a rational way. he other question that imposed here is “at what time people should be rational in their investments in the security markets ?”. This means that investors are rational for their efforts devoted to utility maximization, which are perceived as a result of investing their wealth in the best possible manner. Then, can those two questions be achieved in practice? Many ontological aspects are influenced in their relations by emotions and feelings more than by money as a financial resource . Investors may take irrational financial decisions because of the dominance of those emotions and feelings compared with what investors do toward other actions in their public and special daily life. Understanding investors financial awareness without taking into account the human action is considered as an outstanding problem which can be assimilated as an attempt to sail with compass, but without guided maps. The importance and necessity of human psychological factor are arise when we are talking about investing common stocks in the security market. Then, this means that issues directing investment decisions of individuals in financial assets whether they were stocks or bonds, can be only interpreted with referring to principles of human behavior. Absolutely there is no exaggeration if we said that the market in general be advanced, lagged behind , prospected , and crept when making collective  decisions in buying securities through viewing  psychological factors which capture individuals behaviors after information being collected and analyzed. The validity of an efficient market theory has been widely accepted by its proponents for a long time lasting almost a century so that any research on  the psychological aspects of a security market encountered by objection till a close time of ten years .  

scholarly journals EMT and Political Reform Effects on Chinese Markets: A Literature Review

2021 ◽  
Author(s):  
Luigi Gallo
Keyword(s):  
Literature Review ◽  
Financial Markets ◽  
Political Reform ◽  
Market Theory ◽  
Efficient Market ◽  
Efficient Market Theory ◽  
Chinese Markets ◽  
Analyse Data ◽  
Over Time

The objective of this paper is to analyse the literature on and the evolution of the analysis of Chinese financial markets over time. Seven papers, based mainly on Efficient Market Theory (Fama, 1998) and the correlation between different markets, published in the years 1999-2019, have been selected and compared as they analyse data taken from the Shenzhen and Shanghai markets.

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