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

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

Bitcoin Price Risk—A Durations Perspective

An important aspect of liquidity is price risk, i.e., the risk that a small transaction leads to a large price change. This usually happens in a thin market, when trading opportunities are scarce and the time between subsequent trades is long. We rely on an autoregressive conditional duration model to extract the probability of a substantial price event in a particular time interval and, thus, an intraday risk profile. Our findings show that price risk is highest at times when European and U.S. investors do not trade. In a second step, we relate daily aggregates to characteristics of the Bitcoin blockchain and investigate whether investors account for features like confirmation time or fees when timing their orders.

Towards Increasing Residential Market Transparency: Mapping Local Housing Prices and Dynamics

This article attempts to use spatial maps as a way of presenting additional information about the phenomena occurring in the housing market. In our opinion, spatial maps may facilitate understanding and provide more detailed information, which undoubtedly should increase the transparency of the housing market. The study used 12,219 transactions of apartments in Poznań in the years 2013–2017. General principles of price visualization activity and housing market dynamics were established in this study. The map of prices may reflect the location values determined by the quality of the urban infrastructure, distance from specific locations, and environmental factors. Market activity maps reveal areas where the market is dynamically developing, while information on trends in the number of transactions and price changes may demonstrate the growing or declining attractiveness of areas. The research is based on a model of hedonic regression in the form of ordinary least squares (OLS), quantile regression (QR), and geographically weighted regression (GWR). The maps presented should increase the transparency of the residential market (e.g., by providing more detailed information). However, one should bear in mind the limitations in the use of these methods resulting from a small number of transactions in a thin market.

CAPABILITIES OF REVEALED PREFERENCE METHOD FOR HERITAGE PROPERTY VALUATION

In recent years, the increasing availability of large databases on real estate transaction has opened up new research possibilities using revealed preference method. Therefore, the aim of this paper is to investigate the capability of revealed preference method of ordinary least square and rank transformation regression models in valuing shophouse heritage property. This paper has provided the first application that consider the thin market effects by comparing the ordinary least square and rank transformation regression in obtaining the market value of shophouse heritage property. The original dataset consists of 893 commercial properties transacted from 2004 to 2014 in Kota Bharu, Kelantan Malaysia. After filtration process, only 25 units of shophouse heritage property were available and valid to be used. The findings suggest that rank transformation regression model performs better than the ordinary least square model with double-log as the best model. This suggests that rank transformation regression is capable for heritage property valuation in thin market situation.

The concept of market value in thin markets and its implications for international accounting rules (IFRS)

Purpose The purpose of this paper is to discuss how the concepts market value (MV) and exit price should be interpreted in thin markets and how accounting rules may need to change to take this into account. Design/methodology/approach This is a conceptual paper using hypothetical examples as a base for the conclusions. Findings In a thin market, actors can have rather different reservation prices. The price will then be set through bargaining and the agreed price could be considerable above the reservation price of the actor with the second highest reservation price. The exit price should then be below what the MV was before the transaction and below the entry price, and according to the current accounting rules, the value in the balance sheet should then be below the price paid. The authors’ experience is, however, that this rarely happens in practice. Research limitations/implications The limitation of the paper is that it is a conceptual paper and not based a systematic empirical study of accounting practices. Practical implications The results of the paper indicate that there is a need to revise the current accounting rules. Possible changes are discussed. Originality/value As far as the authors know, this is the first paper that looks at problems in the current value concepts related to differences in reservation prices in thin markets.

Measurement of Investor Sentiment and Its Bi-Directional Contemporaneous and Lead–Lag Relationship with Returns: Evidence from Pakistan

The present study examines bi-directional contemporaneous and lead–lag relationships between investor sentiment and market returns in the emerging market of Pakistan over the period of 2006 to 2016. To measure investor sentiment, the study employs a direct proxy namely Google search volume index (GSVI) and nine other indirect proxies. Besides conventional regression and VAR model, the study applies Geweke’s (1982) tests to investigate the nature of relationships between sentiment and returns. Thus, the study adds to existing literature by providing latest and thorough statistical evidence on the role of investor sentiment in influencing market returns. The study finds sufficient evidence regarding irrational behavior of investors in the thin market of Pakistan. In particular, the results indicate substantive role of sentiment in dragging stock market away from its sustainable path as implied by economic fundamentals.

Leverage Effect and Switching of Market Efficiency Post Goods and Services Tax (GST) Imposition

This paper investigates the leverage effect and switching of market efficiency after the GST imposition on fee-based financial services in Bursa Malaysia and Australian Securities Exchange (ASX). The sample in this paper comprises of public listed companies for the period of one year before and after the GST imposition. GJR-GARCH is employed to evaluate the asymmetry response that is associated with the negative news shocks. To assess the effect of transactional efficiency on the informational efficiency and the structural change of time-varying volatility, SGARCH is adopted. This research reveals the presence of leverage effect in developing and developed market. The GST imposition on fee-based financial services significantly reduces the informational efficiency in Bursa Malaysia, but not in ASX. To boost the tax revenues generated from the financial sector, the policymakers in the developed markets (similar to ASX) should contemplate imposing GST on the fee-based financial services without affecting the stability of the stock market. The investors in thin markets (such as Bursa Malaysia) could forecast the stock returns of the thin market upon GST imposition on fee-based financial services.

Transaction costs and market thinness in crop byproduct markets

Studies in crop byproduct literature have looked more at the nutrient impacts, rather than analytical cost implications of crop byproducts in livestock feed rations. Thin market studies stated the lack of product volume and player count in a market leads to transaction costs such as low market information, which leads to poor liquidity and inaccurate price discovery. This study compares the byproduct markets of dried distillers grains with solubles (DDGS), corn gluten feed (CGF), wheat middlings, soybean hulls, and rice bran, and the more mainstream feed options of corn and soybean meal (SBM). Through a series of interview responses, Chebyshev's inequality calculations, and regression work, this thesis addresses questions on crop byproduct market transaction costs, market size, contracting habits, and price influences. The thesis findings indicate that as markets thin, contracting frequency and substitute product purchasing increase, with byproduct prices shaped by the prices of corn, soybean meal, and substitute byproduct feed ingredients. In addition, this thesis finds that efficient handling and information technologies most effectively manage the transaction costs stemming from critical nutrient, transportation, storage, consistency, and compatibility issues in crop byproduct transactions.