scholarly journals Momentum: An Economic View

2017 ◽  
Vol 8 (3) ◽  
pp. 142 ◽  
Author(s):  
Wilhelm Berghorn ◽  
Sascha Otto
Keyword(s):  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Market Model ◽  
Generation Process ◽  
Momentum Strategies ◽  
Business Condition ◽  
Asset Classes ◽  
Available Information ◽  
Work Supports ◽  
Major Objection

Momentum strategies have widely been recognized in the literature for several markets, asset classes and time horizons. However, these strategies face a major objection as they significantly violate even the weak form of the efficient market hypothesis. Recently, it has been shown that, from a mathematical perspective, the inner dynamics of asset prices are better described by the Mandelbrot Market Model. This model uses fractal trends observed in real stock data, and the mathematical characteristics measured and used in the model show that trends in this fractal setup explain momentum. A central question attached to this mathematical analysis is why these long trends exist, economically. Although it has been documented well in the literature that investors are not rational and are prone to several biases, we show in this work by example that momentum strategies leverage fundamental, company-specific improvements of the business condition, capturing the value generation process. Consequently, this work supports the mathematical claims made previously: There are no efficient markets as investors constantly fail to anticipate available information.

scholarly journals EFIKASNOST FINANSIJSKIH TRŽIŠTA / EFFICIENCY OF FINANCIAL MARKETS

2016 ◽  
Vol 11 (1) ◽  
Author(s):  
Predrag Kapor
Keyword(s):  
Financial Markets ◽  
Behavioral Finance ◽  
Stock Prices ◽  
Global Financial Crisis ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Strong Form ◽  
The Status ◽  
Finance Theory ◽  
Available Information

Are financial markets efficient is a question on which there is still no clear and complete answer. Position that prices of securities fully reflect available information about securities is called the efficient market hypothesis (EMH). The EMH (on the example of stocks) has three forms (or levels) of efficiency: 1) the ‘’ weak’’ form of the EMH- is the claim that stock prices reflect all information contained in previous transactions; 2) the ‘’ semi- strong’’ form of the EMH- is the claim that stock prices reflect all publicly available information, and 3) the’’ strong’’ form of the EMH- is the claim that stock prices reflect all relevant information (public and private), including the privileged (the insider) information.Numerous studies have confirmed the existence of a’’ weak’’ form of the EMH, and generally supported the existence of a’’ semi-strong’’ form of the EMH, but not of a ‘’ strong’’ form of the EMH. However, the EMH, even if it is a ‘’weak’’ or a ‘’semi-strong’’ form has a number of weaknesses. Some of the the EMH assumptions confront with the reality – there is no perfect information, transaction and information costs can be significant, markets are often imperfect, and investors do not have complete knowledge about the set of all available financial strategies for a given situation.The information ’’overload’’ confuses people and affects their ability to prioritize and make good decisions. On the other hand, electronic trading method significantly affects the information at the disposal of the different market actors. It seems that the greatest threat to the EMH comes from the field of behavioral finance, which is engaged in research on the possible impact of psychological factors (loss aversion, anchoring, overconfidence...) on the behavior of investors. The basic argument of behavioral finance is that ’’standard’’ financial theory is not paying attention to how ordinary people make decisions and that ‘’ human factor’’ can not be ignored.Tha aim of this study was to critically examine the EMH. Apperently, the EMH after numerous studes and identified anomalies, largely remains at the level of (insufficiently confirmed) hypothesis, although it is often given the status, or created an illusion, of confirmed. This is also because the EMH is an important component of the rulling ’’paradigm’’ in finance or ’’standard finance theory’’. Joperdizing the status of the EMH bring into question many other important components of this ’’paradigm’’.The EMH has not offered acceptable answers to some of the specific developments and events in the financial market, including the last global financial crisis. But, the EMH still remains one of the cornerstones of ’’standard’’ finance theory.

scholarly journals Directional Momentum Strategies With No-load Mutual Funds

2011 ◽  
Vol 22 (4) ◽  
Author(s):  
Marlena Akhbari ◽  
Nicolas Gressis ◽  
Burhan Kawosa
Keyword(s):  
Mutual Funds ◽  
Stock Prices ◽  
Stock Price ◽  
Large Body ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Future Price ◽  
Momentum Strategy ◽  
Momentum Strategies ◽  
Price Changes

A typical textbook definition of the weak form efficient market hypothesis suggests that past security price changes do not predict future price changes.  But a large body of empirical evidence claims that over horizons of three months to a year stock prices exhibit momentum, that is, continuation in a price direction.  This pattern of stock price momentum is exploited by some mutual funds that typically buy past stock winners and sell past stock losers.  In this paper, we show that if momentum is modified to take into consideration price patterns within the period of selection/formation, the directional momentum strategy applied to stock and/or bond no-load mutual funds proves very profitable for long term (fifteen to twenty years) investors.

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.

scholarly journals Can Economic Factors Improve Momentum Trading Strategies? The Case of Managed Futures during the COVID-19 Pandemic

Economies ◽  
2021 ◽  
Vol 9 (2) ◽  
pp. 86
Author(s):  
Renata Guobužaitė ◽  
Deimantė Teresienė
Keyword(s):  
Financial Markets ◽  
Risk Premium ◽  
Trading Strategies ◽  
Economic Factors ◽  
Momentum Strategies ◽  
New Approach ◽  
Managed Futures ◽  
Asset Classes ◽  
Momentum Trading ◽  
Insight Into

Systematic momentum trading is a prevalent risk premium strategy in different portfolios. This paper focuses on the performance of the managed futures strategy based on the momentum signal across different economic regimes, focusing on the COVID-19 pandemic period. COVID-19 had a solid but short-lived impact on financial markets, and therefore gives a unique insight into momentum strategies’ performance during such critical moments of market stress. We offer a new approach to implementing momentum strategies by adding macroeconomic variables to the model. We test a managed futures strategy’s performance with a well-diversified futures portfolio across different asset classes. The research concludes that constructing a portfolio based on academically/economically sound momentum signals with its allocation timing based on broader economic factors significantly improves managed futures strategies and adds significant diversification benefits to the investors’ portfolios.

Robust Approach to Verifying the Weak Form of the Efficient Market Hypothesis

2011 ◽  
Author(s):  
Luboš Střelec ◽  
Theodore E. Simos ◽  
George Psihoyios ◽  
Ch. Tsitouras ◽  
Zacharias Anastassi
Keyword(s):  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Efficient Market ◽  
Robust Approach

An investigation of time varying market efficiency: evidence from STOXX Europe Christian index

2021 ◽  
Vol 37 (4) ◽  
pp. 631-643
Author(s):  
Tayyaba Yousaf ◽  
Sadia Farooq ◽  
Ahmed Muneeb Mehta
Keyword(s):  
Price Index ◽  
Abnormal Returns ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Time Varying ◽  
Content Type ◽  
Daily Data ◽  
New Information ◽  
Academic Researchers ◽  
The Impact

Purpose The purpose of this study is to investigate whether the STOXX Europe Christian price index (SECI) follows the premise of efficient market hypothesis (EMH). Design/methodology/approach The study used daily data of SECI for the period of 15 years as its launch date i.e. 31 December 2004 to 31 December 2019. Data are analyzed by taking a full-length sample and fixed-length subsample. For subsample, the data are divided into five subsamples of three years each. Subsample analysis is important for analyzing time varying efficiency of the series, as the market is said to follow EMH if it is being efficient throughout the sample. Both type of samples is examined through linear tests including autocorrelations test and variance ratio (VR) test. Findings Tests applied conclude that SECI is weak-form efficient, which means that the prices of the index include all the relevant past information and immediately react to new information. Hence, the investors cannot earn abnormal returns. Originality/value Religion-based indices grasped the attention of investors, policymakers and academic researchers because of increased concern over ethics in business. Though the impact of religion on the economy have been studied in many ways but the efficiency of religion-based indices have been less explored. The current study is primary in its nature as it analysis the efficiency of SECI. This index is important to explore because Christianity is the world’s top religion with 2.3 billion followers around the globe.

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 THE WEAK FORM MARKET EFFICIENCY IN THE MSCI ETF INDICES: CONVENTIONAL AND THE FOURIER UNIT ROOT TEST ON THE DEVELOPED AND DEVELOPING COUNTRIES

2020 ◽  
Vol 8 (4) ◽  
pp. 409-423
Author(s):  
Sümeyra GAZEL
Keyword(s):  
Developing Countries ◽  
Unit Root ◽  
Structural Break ◽  
Unit Root Test ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Developed Countries ◽  
Exchange Traded Funds ◽  
Unit Root Testing ◽  
Daily Data

In this study, weak form efficiency of the Exchange Traded Funds (ETF) in the Morgan Stanley Capital International (MSCI) Index of developed and developing countries is tested. The Fourier Unit Root test, which does not lose its predictive power in terms of structural break date, number and form, is used on daily data. Also, conventional unit root tests are used for comparison between two different tests. Analysis results indicate common findings in some countries for both unit root testing. However, the Fourier unit root test results relatively more support the assumption of efficient market hypothesis that developed countries may be more efficient than developing countries.

scholarly journals Die Johannesburgse Effektebeurs as rasionele kapitaalmark

1981 ◽  
Vol 12 (3) ◽  
pp. 53-59 ◽  
Author(s):  
Leon M. Brummer ◽  
Pieter J. Jacobs
Keyword(s):  
Stock Exchange ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Small Degree ◽  
Point Of View ◽  
Efficient Market ◽  
Price Changes ◽  
Economic Point ◽  
Johannesburg Stock Exchange ◽  
Measure Of Dependence

The Johannesburg Stock Exchange as an efficient market. Finality has not yet been reached on the question whether the Johannesburg Stock Exchange complies with the requirements of the efficient market hypothesis. The results of the research that are published in this article is therefore an attempt to make a contribution to the debate regarding the Johannesburg Stock Exchange as an efficient market. By way of serial correlations as well as runs tests an investigation was carried out into the behaviour of the prices of 94 quoted shares for the period 1970 to 1977. The results of the study give rise to the conclusion that the Johannesburg Stock Exchange does not statistically comply with the weak form of the efficient market hypothesis (the random walk hypothesis), as a measure of dependence between successive price changes was found. Seen from an economic point of view it is, however, doubtful whether investors could use this small degree of dependence between price changes to gain higher returns on share investments.Uitsluitsel met betrekking tot die mate waartoe die Johannesburgse Effektebeurs aan die vereistes vir 'n rasionele mark voldoen, is nog nie verkry nie. Die resultate wat in hierdie artikel voorkom is daarom 'n poging om 'n bydrae in die debat rakende die Johannesburgse Effektebeurs as 'n rasionele mark, te maak. 'n Ondersoek na die markpryse van 94 genoteerde aandele vir die periode 1970-77 is deur middel van reekskorrelasiekoeffisiente en die lopietoets uitgevoer. Die resultate van die studie gee aanleiding tot die gevolgtrekking dat die Johannesburgse Effektebeurs nie statisties aan die swak vorm van die rasionele markhipotese (die willekeurige beweging van markpryse) voldoen nie, aangesien 'n mate van afhanklikheid tussen opeenvolgende prysveranderings gevind is. Uit 'n ekonomiese oogpunt gesien is dit egter twyfelagtig of beleggers hierdie afhanklikheid sal kan aanwend om hoer opbrengste op aandelebeleggings te bewerkstellig.

scholarly journals TESTING THE EFFICIENCY MARKET HYPOTHESIS: AN EXAMPLE OD BOSNIA AND HERZEGOVINA

2019 ◽  
Vol 17 (1) ◽  
Author(s):  
Tijana Šoja ◽  
Zumreta Galijašević ◽  
Emina Ćeman
Keyword(s):  
Financial Markets ◽  
Bosnia And Herzegovina ◽  
Financial Market ◽  
Capital Market ◽  
Strong Influence ◽  
Weak Form ◽  
Financial Instruments ◽  
Price Movement ◽  
Run Test ◽  
Available Information

Governments of many countries, companies and business organizations last decades increasingly pay attention and recognize the importance of the capital market for economic growth and development. One of the factors that has strong influence on the capital market, as a platform for long-term borrowing and obtaining funds, is the price movement of financial instruments traded on capital market. The price movement of financial instruments is linked to the efficiency of the market, and is under strong influence of all available information about companies, which quickly reflect on the prices of financial instruments.Fama (1965) was one of the first economist who used term „efficient financial market“. He conducteda research on the financial market and pointed out that in an efficient market, on average, competition would cause that all effects of the latest market information will be included through the value of shares traded. The hypothesis of an efficient financial market suggests that the price of the shares, financial instruments, reflects all available information, so investor cannot realize extra profits if he has some certain insider information or on the basis of publicly available historical data and information. Many investors are trying to find those securities that are underestimated, and for which is expected to growth in the future. In a case of efficient financial market, it is quite impossible to find underestimated securities because information quickly incorporated into the price of securities. Ttesting of the efficiency of financial market is largely present in the developed markets, while somewhat weaker tests have been carried out on the examples of transitional financial markets. In published researches it is most often confirmed that transition countries have or have had poorly performing financial markets, especially in the initial stages of their development (Bahmani-Oskooee et al, 2016; Kvedaras and Basdevant, 2002).In this research we are testing the efficient market hypothesis for the financial market in Bosnia and Herzegovina. We tested hypothesis that the financial market is weakly efficient. For this test we are using stock index data from the Sarajevo and Banja Luka Stock Exchange, SASX10, BIRS and BATX index. The analysis includes daily, weekly and monthly index movements from 2006 to August 2018, for SASX 10 and BIRS indices, while BATX data is available from 2009 until August 2018. In the first step we calculate returns for all periods (deily, weekly and montly) between indicies and in another step we tested autocorrelation between their returns.Efficient market hypothesis has been tested through three statistical tests: autocorrelation test, run test and variance test. The results obtained by applying different tests do not give a single answer to the question whether financial market in Bosnia and Herzegovina perform at a low level of efficiency. Auto-correlation tests reject the hypothesis of weak form market efficiency,while the run test and the test of variance ratios confirm the weak form of market efficiency. Such findings suggest that it is not possible, with sufficient precision, to predict trends in the financial market in Bosnia and Herzegovina.

Sign in / Sign up

Export Citation Format

Share Document