scholarly journals Long Memory Modeling: Evidence From Mediterranean Stock Indexes

2021 ◽  
Vol 16 ◽  
pp. 560-572
Author(s):  
Saoussan Bouchareb ◽  
Mohammed Salah Chiadmi ◽  
Fouzia Ghaiti
Keyword(s):  
Strong Evidence ◽  
Long Memory ◽  
Stock Markets ◽  
Efficient Market Hypothesis ◽  
Analysis Approach ◽  
Efficient Market ◽  
The Future ◽  
Stock Indexes ◽  
Memory Modeling

We study in this paper the presence of long memory of four Mediterranean stock markets namely Morocco, Turkey, Spain, and France, over the period 2000-2020. The presence of long memory propriety has tested by using the R/S analysis approach. Results show that the four processes have a long memory. furthermore, ARFIMA-FIGARCH, under different distribution assumptions as Normal, Student-t, and Skewed Student- t, was estimated in order to test the feature of long memory in the return and volatility of the stock markets simultaneously. Results show strong evidence of long memory in both returns and volatility for the Moroccan and French stock markets and only in volatility for The Spanish and Turkish ones. The long memory in returns indicates that their behavior is predictable implying the rejection of the efficient market hypothesis. The long memory in volatility shows that risk is an important parameter of the behavior of the future returns in the four stock markets.

scholarly journals Nonlinearities and Chaos: A New Analysis of CEE Stock Markets

Mathematics ◽  
2021 ◽  
Vol 9 (7) ◽  
pp. 707
Author(s):  
Claudiu Tiberiu Albulescu ◽  
Aviral Kumar Tiwari ◽  
Phouphet Kyophilavong
Keyword(s):  
Capital Markets ◽  
Stock Markets ◽  
Transition Period ◽  
Chaotic Behavior ◽  
Efficient Market Hypothesis ◽  
Eastern European ◽  
Price Behavior ◽  
Financial Systems ◽  
Efficient Market ◽  
Level Of Significance

After a long transition period, the Central and Eastern European (CEE) capital markets have consolidated their place in the financial systems. However, little is known about the price behavior and efficiency of these markets. In this context, using a battery of tests for nonlinear and chaotic behavior, we look for the presence of nonlinearities and chaos in five CEE stock markets. We document, in general, the presence of nonlinearities and chaos which questions the efficient market hypothesis. However, if all tests highlight a chaotic behavior for the analyzed index returns, there are noteworthy differences between the analyzed stock markets underlined by nonlinearity tests, which question, thus, their level of significance. Moreover, the results of nonlinearity tests partially contrast the previous findings reported in the literature on the same group of stock markets, showing, thus, a change in their recent behavior, compared with the 1990s.

Efficient Market Hypothesis for Islamic Capital Markets

2020 ◽  
pp. 489-523
Author(s):  
Hakan Altin
Keyword(s):  
Stock Markets ◽  
Explanatory Power ◽  
Market Price ◽  
Efficient Market Hypothesis ◽  
Global Markets ◽  
Efficient Market ◽  
Share Prices ◽  
Global Stock Markets ◽  
Stock Share ◽  
Theoretical Results

This study has two important findings firstly, the theoretical results related to the efficient market hypothesis; and secondly, the results of application. The theoretical results show that if the market price of an asset includes all the information that influences its price, then that market is an efficient market. According to the efficient market hypothesis, investors cannot earn gains above the market return. Since stock share prices are unpredictable, it is assumed that when the information that the market had already been expecting is finally announced, the stock share prices will not change. That is because this announcement does not contain any information that can change the prices. The results obtained from the application show that the existence of abnormal return is valid for Islamic Stock Markets. Therefore, the findings mediate against the efficient market hypothesis. However, when the size of abnormal returns is observed, the results are almost equal to market returns. This finding supports the efficient market hypothesis. Islamic stock markets are integrated with the world at least as much as the non-Islamic global markets are. Islamic stock markets act together with the non-Islamic global markets. The risks and returns that the Islamic and non-Islamic stock markets provide to the investors are very close to each other. In conclusion, the efficient market hypothesis maintains its explanatory power for both Islamic stock markets and non-Islamic global stock markets. Islamic markets offer new investment opportunities on a global scale.

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.

scholarly journals A Survey on Efficiency and Profitable Trading Opportunities in Cryptocurrency Markets

2019 ◽  
Vol 12 (2) ◽  
pp. 67 ◽  
Author(s):  
Kyriazis
Keyword(s):  
Long Memory ◽  
Detrended Fluctuation Analysis ◽  
Efficient Market Hypothesis ◽  
Trading Strategies ◽  
Fluctuation Analysis ◽  
Efficient Market ◽  
Systematic Survey ◽  
Rescaled Range ◽  
Pricing Behavior ◽  
Detrended Fluctuation

This study conducts a systematic survey on whether the pricing behavior of cryptocurrencies is predictable. Thus, the Efficient Market Hypothesis is rejected and speculation is feasible via trading. We center interest on the Rescaled Range (R/S) and Detrended Fluctuation Analysis (DFA) as well as other relevant methodologies of testing long memory in returns and volatility. It is found that the majority of academic papers provides evidence for inefficiency of Bitcoin and other digital currencies of primary importance. Nevertheless, large steps towards efficiency in cryptocurrencies have been traced during the last years. This can lead to less profitable trading strategies for speculators.

scholarly journals Predictability of stock market indexes following large drawdowns and drawups

2021 ◽  
Vol 19 (1) ◽  
pp. 1-23
Author(s):  
Vinicius Ratton Brandi
Keyword(s):  
Stock Markets ◽  
Abnormal Returns ◽  
Efficient Market Hypothesis ◽  
Fixed Time ◽  
Uncertain Information ◽  
Short Term ◽  
Efficient Market ◽  
Information Hypothesis ◽  
Novel Approach ◽  
Lower Magnitude

The efficient market hypothesis is one of the most popular subjects in the empirical finance literature. Previous studies of the stock markets, which are mostly based on fixed-time price variations, have inconclusive findings: evidence of short-term predictability varies according to different samples and methodologies. We propose a novel approach and use drawdowns and drawups as triggers, to investigate the existence of short-term abnormal returns in the stock markets. As these measures are not computed within a fixed time horizon, they are flexible enough to capture subordinate, time-dependent processes that could drive market under- or overreaction. Most estimates in our results support the efficient market hypothesis. The underreaction hypothesis receives stronger support than does overreaction, with higher prevalence of return continuations than reversals. Evidence for the uncertain information hypothesis is present in some markets, mainly after lower-magnitude events.

scholarly journals Impact of return on long-memory data set of volatility of Dhaka Stock Exchange market with the role of financial institutions: an empirical analysis

2017 ◽  
Vol 12 (3) ◽  
pp. 48-60 ◽  
Author(s):  
Muhammad Mahboob Ali ◽  
Aviral Kumar Tiwari ◽  
Naveed Raza
Keyword(s):  
Stock Returns ◽  
Long Memory ◽  
Stock Exchange ◽  
Research Work ◽  
Efficient Market Hypothesis ◽  
Vital Role ◽  
Exchange Market ◽  
Efficient Market ◽  
Data Set ◽  
Real Picture

The current study intends to empirically test a relationship between long-memory features in returns and volatility of Dhaka Stock Exchange market. As such, the study uses the ARFIMA-FIGARCH and FIPARCH structure for the daily data ranging from 15 December 2003 to July 31, 2013 of Dhaka Stock Exchange market index, i.e., DSE General Index (DGEN). The observed indication assembled from long-memory tests supports the occurrence of long memory in Bangladesh stock returns. The study aims at doing research work with long-memory data set, as it provides a superior strategy, as well as gives real picture with short-memory data set. Moreover, the backup indication for existence of long memory in both return and volatility denies the efficient market hypothesis of Fama (1970) that the future return and volatility values are unpredictable. Extra measures ought to be given for the smooth functioning of the Dhaka Stock Exchange market so that both individual and institutional investors can get congenial atmosphere to invest. Authors’ suggested that Bangladesh Bank must play vital role as share market of Bangladesh is dominated by banking shares and in case of other listed shares of the Dhaka Stock Exchange, market authority should deal with transparently and fairly so that the market can be transformed into strong efficient market. This requires suitable directives, groundwork, removing malpractices and also implementation of investors’ friendly decisions. Further, fiscal policy of the country should be pro investor friendly, as well as monetary policy should work as complementary towards investment at stock exchange market as suggested by the authors.

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.

Testing the efficient market hypothesis in Latin American stock markets

2020 ◽  
Vol 540 ◽  
pp. 123082 ◽  
Author(s):  
M.A. Sánchez-Granero ◽  
K.A. Balladares ◽  
J.P. Ramos-Requena ◽  
J.E. Trinidad-Segovia
Keyword(s):  
Latin American ◽  
Stock Markets ◽  
Efficient Market Hypothesis ◽  
Efficient Market

scholarly journals Testing Semi-strong Form Efficiency of Stock Market

2001 ◽  
Vol 40 (4II) ◽  
pp. 651-674 ◽  
Author(s):  
Salman Syed Ali ◽  
Khalid Mustafa
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Markets ◽  
Efficient Market Hypothesis ◽  
Seasonal Effects ◽  
Efficient Market ◽  
New Information ◽  
Empirical Regularities ◽  
Day Of The Week ◽  
Stock Traders

The efficient market hypothesis suggests that stock markets are “informationally efficient”. That is, any new information relevant to the market is spontaneously reflected in the stock prices. A consequence of this hypothesis is that past prices cannot have any predictive power for future prices once the current prices have been used as an explanatory variable. In other words the change in future prices depends only on arrival of new information that was unpredictable today hence it is based on surprise information. Another consequence of this hypothesis is that arbitrage opportunities are wiped out instantaneously. Empirical tests of the efficient market hypothesis actually test for these consequences in various ways. Some of them have been summarised in earlier chapters. These tests generally could not conclusively accept the random-walk hypothesis of stock returns even when GARCH effects were accounted for. Many studies have found empirical regularities that are contrary to the efficient market hypothesis. For example, the monthly, weekly and daily returns on stocks tend to exhibit discernable patterns, such as seasonal affects, month of the year affect, day of the week affect, hourly affect etc. In case of Pakistan’s stock markets too such affects are identified. Such as the Ramadan affect [see Hussain and Uppal (1999)], seasonal effects and day of the week affect. Further, the wide spread use of “technical analysis” among stock traders and their ability to predict to some extent the direction of movements in the prices of individual stocks over medium term testifies to the existence of patterns and seasonal trends.

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