scholarly journals Testing Weak-Form Market Efficiency On The TSX

2014 ◽  
Vol 30 (3) ◽  
pp. 647 ◽  
Author(s):  
Ilona Shiller ◽  
Ishmael Radikoko
Keyword(s):  
Market Efficiency ◽  
Unit Root ◽  
Long Memory ◽  
Statistical Tests ◽  
Weak Form ◽  
Equity Market ◽  
Residual Series ◽  
The Common ◽  
Two Indices ◽  
Equity Index

<p>This study tests the validity of the weak-form EMH on the Canadian TSX equity market using seven TSX daily index returns. Quantitatively, a variety of statistical tests is used to test for the randomness of return series. Results of the common statistical (i.e., the autocorrelation, the BG, the runs) tests all suggest that returns are serially correlated, except returns on the TSX 60 capped index. After rejecting the RWM of TSX indices using univariate unit root (i.e., ADF, PP, KPSS), we proceed to test for the possibility of nonlinear dynamic patterns present in return series. BDS results reject an IID underlying residual series after fitting AR(2) to TSX daily index returns, indicating that a deterministic chaotic process describes the data well. This finding of a temporal dependency is supported also by results of the R/S analysis, which indicates that all TSX index returns possess long-memory properties of an anti-persistent trend-reversing behaviour with two indices showing stronger degree of anti-correlation and five indices showing weaker degree of anti-correlation. Overall, results uniformly reject the RWM governing TSX equity index returns, implying that the Canadian equity market is weak-form inefficient.</p>

scholarly journals The market efficiency of the Tanzania stock market

2016 ◽  
Vol 11 (3) ◽  
pp. 75-86 ◽  
Author(s):  
Josephine Njuguna
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Unit Root ◽  
Stock Exchange ◽  
Unit Root Test ◽  
Weak Form ◽  
Ratio Test ◽  
Variance Ratio ◽  
Test Unit ◽  
Variance Ratio Test

The purpose of this article is to examine the efficiency of the Tanzania stock market. The study attempts to answer whether the Tanzania stock market is weak-form efficient. The study applies a battery of tests: the serial correlation test, unit root tests, runs test and the variance ratio test using daily and weekly data with a sample spanning from November 2006 to August 2015 for the Dar es Salaam Stock Exchange (DSE) all share index and from January 2009 to August 2015 for the DSE share index. Overall, the results of the market efficiency are mixed. The serial correlation test, unit root test and the runs test do not support weak-form efficiency, while the more robust variance ratio test supports weak-form efficiency for the DSE. The main contribution of the study is that the market efficiency of the Tanzania stock market has increased over the sample period. Keywords: adaptive market hypothesis, efficiency market hypothesis, serial correlations test, unit root test, runs test, variance ratio test, Dar es Salaam Stock Exchange. JEL Classification: G14, G15

scholarly journals Market Efficiency of Exchange Rate of Bitcoin with Dollar and Rupiah of Foreign Exchange Markets: Weak and Semi-Strong Form Test

2021 ◽  
Vol 21 (2) ◽  
pp. 152
Author(s):  
Valenchya Kristina Umardi ◽  
Rizal Nora Amelda
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Market Efficiency ◽  
Unit Root ◽  
Foreign Currency ◽  
Weak Form ◽  
Strong Form ◽  
High Rate ◽  
The Us ◽  
Us Dollar

Bitcoin is one of the cryptocurrencies that had a high rate of return since its appearance in 2009. However, the exchange rate of Bitcoin against any foreign currency is considered to have high volatility making it difficult to determine the real value of Bitcoin. The main purpose of this research is to find the value of Bitcoin, especially US Dollar and Rupiah currencies. The test is carried out using the weak market efficiency hypothesis and the semi-form market coefficient hypothesis. The data processing methods are used the stationary test (ADF, KPSS, and ERS) to test the efficiency of the weak form market and the cointegration test (Johansen Cointegration) with the VECM model to check the efficiency of the semi-strong market. The results show that the Bitcoin exchange rate does not have a unit root so it is inefficient in a weak form and has a negative effect on the USD / IDR exchange rate so that it is not efficient in semi-strong form as well as on the US Dollar and Rupiah exchange rates. This happens because Bitcoin transactions as a medium of exchange in Indonesia are still illegal. So that the Bitcoin exchange rate against the US Dollar and Rupiah exchange rates is biased because it does not reflect the available information, both historical information and public information. Keywords—Bitcoin Exchange Rate; Market Efficiency; Unit Root; Cointegration

Globalization and Time-Varying Market Efficiency

2019 ◽  
pp. 480-499
Author(s):  
Melik Kamışlı ◽  
Serap Kamışlı ◽  
Fatih Temizel
Keyword(s):  
Real Estate ◽  
Market Efficiency ◽  
Portfolio Management ◽  
Unit Root ◽  
Unit Root Test ◽  
Weak Form ◽  
Global Scale ◽  
Time Varying ◽  
Policy Makers ◽  
Weak Form Efficiency

The main purpose of this study is to determine time-varying weak form efficiency of 18 Borsa İstanbul sub-sector indices. In line with this purpose weak form efficiency is tested with innovative technique alongside traditional methods. The study indicated that bank, real estate invest trusts, holding & investments, telecommunication, wood, paper & printing, insurance, tourism and transportation indices are not linear. The weak form efficiency of aforementioned indices is analyzed with a rolling KSS unit root test developed by Yılancı. It is concluded depending on the applied tests that weak form efficiency of all of the nonlinear sub-sector indices has a time-varying structure. Results also showed that global scale events affect weak form efficiency of the indices in different durations. Findings gained from the study can be used by investors in strategic portfolio management decisions and by policy makers as well.

scholarly journals TESTING THE WEAK-FORM EFFICIENCY HYPOTHESIS IN THE UKRAINIAN STOCK MARKET VERSUS THOSE OF THE USA, RUSSIA, AND POLAND

Ekonomika ◽  
2013 ◽  
Vol 92 (2) ◽  
pp. 108-121
Author(s):  
Vladimir Khrapko
Keyword(s):  
Random Walk ◽  
Stock Market ◽  
Market Efficiency ◽  
Hypothesis Test ◽  
Statistical Tests ◽  
Kendall Test ◽  
Weak Form ◽  
Stock Market Index ◽  
Main Research ◽  
The Usa

Abstract. Objective. This empirical research was made to test a weak-form market efficiency of the stock market index in Ukraine as compared with other countries’ stock indexes. Data. Daily data were investigated for the period from August 2008 to October 2011. Methods. We applied different statistical tests to verify the hypothesis that the Ukrainian stock market follows a random walk. Main results. The main research findings are: the daily returns are not normally distributed; I.I.D. tests and the Kendall test support the random walk hypothesis. Test results on autocorrelation and variance stability were ambiguous. The reported results may be considered as the first approach to the further research on the efficiency of the Ukrainian securities markets.Key words: Ukraine, stock market, efficiency, test

scholarly journals The Analysis of Weak-Form Efficiency in the Market of Crude Oil

2016 ◽  
Vol 5 (1) ◽  
pp. 101 ◽  
Author(s):  
Anna Górska ◽  
Monika Krawiec
Keyword(s):  
Crude Oil ◽  
Market Efficiency ◽  
Stock Prices ◽  
Statistical Tests ◽  
Commodity Prices ◽  
Weak Form ◽  
Variance Ratio ◽  
Calendar Effects ◽  
Day Of The Week ◽  
Weak Form Efficiency

Crude oil is the strategic commodity whose market has become the biggest commodity market in the world over the past 40 years. The main actors in the market, such as producers, refiners, financial institutions, and individual traders are interested in recognizing some trends, patterns or anomalies in performance of oil prices and returns, they could benefit from. Such anomalies among others are calendar effects, for example the day-of-the week effect, the month-of-the year effect, holidays effect or the turn-of-the month effect. Either the calendar effects are observed for stock prices, or for commodity prices, they make the markets inefficient. According to classical Fama’s definition: a market in which prices always fully reflect available information is called efficient. However, there are 3 types of market efficiency: weak-form efficiency, semistrong-form efficiency, strong-form efficiency. The weak-form market efficiency is tested the most often. There are several tools used for its verification, for example: some statistical tests (unit root tests, autocorrelation tests, variance ratio tests), long-run relationships and correlation analysis, calendar effects analysis. Our previous research focused on searching for calendar effects in the market of crude oil (Górska, Krawiec 2015), shows the existence of the-day-of-the week and the month effects. It may imply market inefficiency. That is why the present paper is aimed at further testing weak-form market efficiency. The empirical data covers daily closing prices of crude oil in USD per barrel from 2000 to 2015 and includes, both West Texas Intermediate (WTI) and Brent quotations. Having calculated their logarithmic returns, we apply the following tests: runs test, variance ratio, autocorrelation test.

scholarly journals Weak form market efficiency: A case study of Asia-Pacific markets

2020 ◽  
Vol 14 ◽  
Keyword(s):  
Market Efficiency ◽  
Unit Root ◽  
Unit Root Test ◽  
Weak Form ◽  
Asia Pacific ◽  
Ratio Test ◽  
Developed Markets ◽  
Watson Test ◽  
Weak Form Efficiency

This study aims to test the weak form market efficiency for five developed markets, nine emerging markets and three frontier markets in the Asia-Pacific region. The tools applied in the test of this form of market efficiency are serial correlation test, runs test and unit root test. The analysis is performed by using logarithm return for the period of 2008 to 2018. For all markets in our research, the results strongly reject the weak form efficiency when the unit root tests are carried out, while the results from the Durbin-Watson test are in complete contrast. However, in the runs test and variance ratio test, the results provide mixed evidences of weak form efficiency of the markets

scholarly journals Validity of Weak-Form Market Efficiency in Central and Eastern European Countries (CEECs): Evidence from Linear and Nonlinear Unit Root Tests

2019 ◽  
Vol 19 (4) ◽  
pp. 399-428
Author(s):  
Mehmet Levent Erdas
Keyword(s):  
Czech Republic ◽  
Market Efficiency ◽  
Unit Root ◽  
Stock Markets ◽  
Slovak Republic ◽  
Weak Form ◽  
Unit Root Tests ◽  
The Czech Republic ◽  
Linear And Nonlinear ◽  
Nonlinear Unit Root Tests

Abstract This paper aims to focus weekly stock market prices from the CEECs (Lithuania, Hungary, Romania, Croatia, Slovenia, Poland, Bulgaria, the Slovak Republic, Latvia, Estonia, and the Czech Republic) markets for evidence of weak-form market efficiency. This is complemented by the use of comprehensive unit root tests to test for abnormal return behaviour in these stock markets. For this purpose, Harvey et al. (2008) linearity test was applied in order to determine the characteristics of the series. The results indicate that the series with linear characteristics are Slovenia, Bulgaria, the Slovak Republic, Estonia, and the Czech Republic and those with non-linear characteristics are Lithuania, Hungary, Romania, Croatia, Poland, and Latvia. Then, in order to examine the weak-form market efficiency, DF-GLS (1996), Phillips-Perron (1988) and Lee-Strazicich (2003) unit root tests are applied to linear series and Kapetanios et al. (2003) and Kruse (2011) tests were applied to nonlinear series. The linear and nonlinear unit root tests evidence that all the selected stock markets in CEECs have a unit root, in other words, are non-stationary. In the period analyzed, the results suggest that the weak-form efficient market hypothesis holds in the CEECs. Accordingly, the results indicate support for the validity of the random walks hypothesis in all the selected stock markets in CEECs. It means that investors should not be able to earn abnormal returns by carrying out the same analysis and analysing historical prices in CEECs. The finding of weak-form market efficiency has notable implications from the point of capital allocation, stock price predictability, and the influence of shocks to stock prices.

scholarly journals Modeling Long Memory In The Russian Stock Market: Evidence From Major Sectoral Indices

2014 ◽  
Vol 30 (2) ◽  
pp. 567 ◽  
Author(s):  
Kashif Saleem
Keyword(s):  
Stock Market ◽  
Long Memory ◽  
Weak Form ◽  
Equity Market ◽  
Stock Market Volatility ◽  
Figarch Model ◽  
Russian Stock Market ◽  
Garch Modeling ◽  
Daily Returns ◽  
Modern Russian

<p>This paper studies the market efficiency of modern Russian stock market. In particular, we look at the long memory in stock market volatility in the Russian financial market. To examine the temporal dependencies in depth we utilize major sectors of the Russian stock market. We take a GARCH modeling approach. Specifically, we estimate a FIGARCH model proposed by Baillie et al. (1996) using daily returns. We find evidence of long memory in all sectors of the Russian equity market, implying that, all the market sectors under investigation are weak form inefficient. Our results show that the volatility has a predictable structure in all the sectors of modern Russian stock market, signifying the need of regulatory and economic reforms within the Russian financial system.</p>

scholarly journals Eurusd Intraday Price Reversal

2014 ◽  
Vol 14 (2) ◽  
pp. 152-162
Author(s):  
Marta Wiśniewska
Keyword(s):  
Market Efficiency ◽  
Unit Root ◽  
High Frequency ◽  
Mean Reversion ◽  
Weak Form ◽  
Price Reversal ◽  
Average Maximum ◽  
The Mean ◽  
Adf Test ◽  
Fx Market

Abstract The study investigates the mean reversion in 1-minute EURUSD. Intraday patters in FX seem of particular interest as more and more trades in the FX market are automated high frequency trades (HFT). The study reveals that the mean reversion is present in the intraday EURUSD. ADF test rejects unit root. The average of the deviation of EURUSD from its (moving) mean is close to zero. Furthermore when short and long positions are simultaneously open, the average maximum return achieved through 24 hour period is similar, providing yet another evidence for mean reversion and lack of weak form of market efficiency.

Non-linear approach to Random Walk Test in selected African countries

2018 ◽  
Vol 14 (3) ◽  
pp. 362-376 ◽  
Author(s):  
Emmanuel Joel Aikins Abakah ◽  
Paul Alagidede ◽  
Lord Mensah ◽  
Kwaku Ohene-Asare
Keyword(s):  
South Africa ◽  
Random Walk ◽  
Stock Market ◽  
Market Efficiency ◽  
Unit Root ◽  
Unit Root Test ◽  
Weak Form ◽  
African Countries ◽  
Content Type ◽  
Non Linear

Purpose The purpose of this paper is to re-examine the weak form efficiency of five African stock markets (South Africa, Nigeria, Egypt, Ghana and Mauritius) using various tests to assess the impact of non-linearity effect and thin trading which are prevalent in African markets on market efficiency. Design/methodology/approach The weekly returns of S&P/IFC return indices for five African countries over the period 2000-2013 were obtained from DataStream and analyzed. The study adopted the newly developed Non-Linear Fourier unit root test advanced by Enders and Lee (2004, 2009) which allows for an unknown number of structural breaks with unknown functional forms and non-linearity in data generating process of stock prices series to test the Random Walk Hypothesis (RWH) for the five markets, and an augment regression model. Findings In light of the empirical evidence the author(s) using Non-linear Fourier Unit Root Test only fail to reject the RWH for South Africa, Nigeria and Egypt leading to the conclusion that these markets follow the RWH and weak-form efficient whilst Ghana and Mauritius are weak-form inefficient. Besides, evaluating non-linear models without adjusting for thin trading effect shows that, South Africa and Ghana markets are weak-form efficient while Nigeria, Egypt and Mauritius are not. However, after accounting for thin trading effect, the author(s) find that South Africa and Egypt markets follow the RWH. The findings imply that market efficiency results depend on the methodology used. Originality/value This paper provides further evidence on stock market efficiency in emerging markets. The finding suggests that thin trading and non-linearity effect influences markets efficiency tests in African stock markets. Thus, recent structural adjustment and liberalization policies have not enhanced stock market operations in Africa. This paper therefore has implications for policy makers and international investors.

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