scholarly journals Memory Effects on Saudi Arabian Stock Market – Empirical Evidence

2009 ◽  
Vol 1 (2) ◽  
Author(s):  
Khalid ALKHATHLAN ◽  
Sella PRABAKARAN
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Linear Models ◽  
Statistical Tests ◽  
Saudi Arabian ◽  
Efficient Market Hypothesis ◽  
Memory Effects ◽  
Efficient Market ◽  
Non Linear ◽  
Portfolio Managers

This paper makes a serious endeavor to investigate whether there exists a need to study the use of non-linear models to test the survival of memory effects in a developing stock market like Saudi Arabia, performing thereon the various statistical tests for the normality of data. It also discussing how various authors are challenging the efficient market hypothesis. This has led to the use of non-linear dynamic systems for modeling movement in stock prices. In order to confirm whether the efficient market hypothesis is applicable to the Saudi Arabian Stock Market, the study has used the TADAWUL returns for the last two decade and tested them for normality. And also find out the various features of the logarithmic return spectrum of the Saudi Arabian stock markets. It also scrutinizes the possible existence of dependencies and memory effects in the return processes. In particular, it performs Rescaled Range (R/S) analysis. The results throw up several intriguing issues of relevance to portfolio managers, stock market players and analysts and academicians. Key Words: EMH, Chaos, Brownian Motion, R/S method, TASI     

scholarly journals An Empirical Analysis of the Efficient Market Hypothesis in China’s Stock Market

2021 ◽  
Vol 4 (3) ◽  
pp. 1-5
Author(s):  
Jiaxuan Xu
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Empirical Research ◽  
Empirical Analysis ◽  
Stock Prices ◽  
Efficient Market Hypothesis ◽  
Security Market ◽  
Stock Trading ◽  
Efficient Market ◽  
Basic Framework

The efficient market hypothesis is one of the most important theories in finance. According to this hypothesis, in a stock market with sound laws, good functions, high transparencies, and extensive competitions, all valuable information is timely, accurately, and fully reflected in the trend of stock prices including the current and future values of enterprises. Unless there are market manipulations, it would be impossible for investors to gain more above the average profits in the market by analyzing former prices. Since the efficient market hypothesis has been introduced, it has become an interest in the empirical research of the security market. It is one of the most controversial investment theories and there are many evidences supporting and also opposing this hypothesis. Nevertheless, this hypothesis still holds an important status in the basic framework of mainstream theories in modern financial markets. By analyzing simulated investment transactions in regard to stock trading of three different enterprises, this paper verified that the efficient market hypothesis is partially valid.

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.

scholarly journals Empirical Testing of the Response of Czech Stock Market to Downgrades of Greek Credit Rating in the Light of the Efficient Market Hypothesis

2018 ◽  
Vol 9 (1) ◽  
pp. 57-71 ◽  
Author(s):  
Petr Seďa ◽  
Juan Antonio Jimber del Río ◽  
María De los Baños García-Moreno García
Keyword(s):  
Stock Market ◽  
Credit Rating ◽  
Statistical Tests ◽  
Abnormal Returns ◽  
Efficient Market Hypothesis ◽  
Empirical Testing ◽  
Efficient Market ◽  
Nonparametric Statistical ◽  
The Impact ◽  
Analytical Approaches

Empirical testing of the linkages between macroeconomic news and asset price movements in terms of response to released macroeconomic information have been a subject of many investigations using different testing methods. The objective of this paper is to study the impact of announcements of Greek credit rating downgrades on the prices of the most liquid assets quoted in the Czech stock market. This issue is tightly related to semi-strong form of the efficient market hypothesis, which is one of possible analytical approaches when analyzing behaviour of assets in financial markets. The reaction of the Czech stock market is assessed in relation to seven announcements of Moody´s rating agency regarding changes of credit rating of Greek government bonds in the period 2009–2012. For the purpose of this paper, the event study methodology is applied. The basic idea of this statistical method is to determine values of abnormal returns, which can be defined as a difference between actual and equilibrium returns. In order to calculate equilibrium returns, the Capital Asset Pricing Model (CAPM) is used. The differences between actual and equilibrium returns are then verified with a help of selected nonparametric statistical tests. Namely, the exact sign test and the Wilcoxon signed-rank test are utilized. Based on results of nonparametric statistical tests, the null hypothesis of information efficiency of the Czech stock market is conclusively rejected.

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.

Non-Linearity and Chaotic Behaviour in Cyprus Stock Market

2015 ◽  
Vol 5 (4) ◽  
Author(s):  
Athina Bougioukou
Keyword(s):  
Lyapunov Exponent ◽  
Stock Market ◽  
Chaos Theory ◽  
Linear Dependence ◽  
Chaotic Behavior ◽  
Efficient Market Hypothesis ◽  
Chaotic Behaviour ◽  
Maximum Lyapunov Exponent ◽  
Efficient Market ◽  
General Index

The intention of this research is to investigate the aspect of non-linearity and chaotic behavior of the Cyprus stock market. For this purpose, we use non-linearity and chaos theory. We perform BDS, Hinich-Bispectral tests and compute Lyapunov exponent of the Cyprus General index. The results show that existence of non-linear dependence and chaotic features as the maximum Lyapunov exponent was found to be positive. This study is important because chaos and efficient market hypothesis are mutually exclusive aspects. The efficient market hypothesis which requires returns to be independent and identically distributed (i.i.d.) cannot be accepted.

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 Forecasting stock returns on the Amman Stock Exchange: Do neural networks outperform linear regressions?

2021 ◽  
Vol 18 (4) ◽  
pp. 280-296
Author(s):  
Abdel Razzaq Al Rababa’a ◽  
Zaid Saidat ◽  
Raed Hendawi
Keyword(s):  
Stock Market ◽  
Regression Models ◽  
Linear Models ◽  
Stock Exchange ◽  
Market Returns ◽  
Stock Market Returns ◽  
Statistical Measures ◽  
Amman Stock Exchange ◽  
Non Linear ◽  
Ann Models

Different models have been used in the finance literature to predict the stock market returns. However, it remains an open question whether non-linear models can outperform linear models while providing accurate predictions for future returns. This study examines the prediction of the non-linear artificial neural network (ANN) models against the baseline linear regression models. This study aims specifically to compare the prediction performance of regression models with different specifications and static and dynamic ANN models. Thus, the analysis was conducted on a growing market, namely the Amman Stock Exchange. The results show that the trading volume and interest rates on loans tend to explain the monthly returns the most, compared to other predictors in the regressions. Moreover, incorporating more variables is not found to help in explaining the fluctuations in the stock market returns. More importantly, using the root mean square error (RMSE), as well as the mean absolute error statistical measures, the static ANN becomes the most preferred model for forecasting. The associated forecasting errors from these metrics become equal to 0.0021 and 0.0005, respectively. Lastly, the analysis conducted with the dynamic ANN model produced the highest RMSE value of 0.0067 since November 2018 following the amendment to the Jordanian income tax law. The same observation is also seen since the emerging of the COVID-19 outbreak (RMSE = 0.0042).

scholarly journals Exploring price gap anomaly in the Ukrainian stock market

2019 ◽  
Vol 16 (2) ◽  
pp. 150-158 ◽  
Author(s):  
Alex Plastun ◽  
Inna Makarenko ◽  
Lyudmila Khomutenko ◽  
Svitlana Shcherbak ◽  
Olha Tryfonova
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Statistical Tests ◽  
Efficient Market Hypothesis ◽  
Trading Strategy ◽  
Momentum Effect ◽  
Dummy Variables ◽  
Price Patterns ◽  
Student’S T ◽  
Trading Simulation

This paper analyzes price gaps in the Ukrainian stock market for the case of UX index over the period 2009–2018. Using different statistical tests (Student’s t-tests, ANOVA, Mann-Whitney test) and regression analysis with dummy variables, as well as modified cumulative approach and trading simulation, the authors test a number of hypotheses searching for price patterns and abnormal market behavior related to price gaps: there is seasonality in price gaps (H1); price gaps generate statistical anomalies in the Ukrainian stock market (H2); upward gaps generate price patterns in the Ukrainian stock market (H3) and downward gaps generate price patterns in the Ukrainian stock market (H4). Overall results are consistent with the Efficient Market Hypothesis: there is no seasonality in price gaps and in most cases there is no evidences of price patterns or abnormal price behavior after the gaps in the Ukrainian stock market. Nevertheless, the authors find very strong and convincing evidences in favor of momentum effect on the days of negative gaps. These observations are confirmed by trading simulations: trading strategy based on detected price pattern generates profits and demonstrates overall efficiency, which is against the market efficiency. These results can be interesting both for academicians (further evidences against market efficiency) and practitioners (real and effective trading strategy to generate profits in the Ukrainian market market).

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.

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