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The continuous debate and research related to High Frequency Trading emphasises the importance of performing analysis on topics associated with the interaction of traders with different trading speeds, and the effects of this interaction on price efficiency and market quality. The aim of this paper is directly related to the analysis on how information diffusion may affect order submission decisions of traders, with different trading speeds and how these may affect price efficiency or market quality. The incorporation of information in submitted orders evidently affects prices, but it may also affect market quality for different reasons e.g., the use of low-quality information, or the fact that slower traders may be considering information that has already been incorporated in the market prices by faster traders, hence leading to the mispricing of the fair value. This paper provides findings on the above-mentioned topics, based on a literature review - both theoretical or of empirical studies (which are scarcely available) and leads to the conclusion that High Frequency Traders could be treated as natural “insider traders” leading to significant price efficiency, as understood by the Efficient Market Hypothesis.

PurposeThis study examines the Gamestop (GME) short squeeze in early 2021. Using intraday data for the period 4/1/2021–5/2/2021, the author provides empirical evidence that the GME stock price exhibited abnormal behavior.Design/methodology/approachThe author uses the popular Runs test to show that the GME returns were not randomly distributed, which is an indication of a violation of the Efficient Market Hypothesis (EMH). The main objective of the paper is to provide new quantitative evidence that stock returns are abnormal when short squeeze conditions emerge. The author employs the asymmetry Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) models (the Exponential GARCH (EGARCH) and the Threshold GARCH (TGARCH)) and provides evidence that an exceptional time series feature emerged during the examined period: the antileverage effect.FindingsThe results show that the GME returns were not randomly distributed during the examined period and the asymmetry GARCH models indicate that, in contrast to what the time series normally show, volatility increased when the GME prices increased.Research limitations/implicationsThis paper presents a new/alternative approach for the study of EMH and abnormal returns in financial markets. Further studies on market performance during similar short squeeze conditions should be carried out in order to obtain empirical evidence for the antileverage effect abnormality.Practical implicationsThis paper could be useful for scholars who examine the EMH in financial markets because it suggests an additional method for testing abnormalities. It also presents a useful tool that allows practitioners to monitor for indications of abnormality in the stock market during a short squeeze, since the emergence of the antileverage abnormality could function as such an indication. Additionally, the outcome of this analysis could be useful for regulators because coordination among investors is easier than ever in the Internet era and such events may happen again in the future; even under normal (not short squeeze) conditions and lead to market instability.Originality/valueThis research differs from other studies that examine the GME case because it presents a new way to quantitatively present the abnormal performance of the stock markets for reasons that could be linked with the emergence of short squeeze conditions.

Borsa Istanbul introduced data analytics to present additional information about its market conditions. We examine whether this product can be utilized via various machine learning methods to predict intraday excess returns. Accordingly, these analytics provide significant prediction ratios above 50% with ideal profit ratios that can reach up to 33%. Among all the methods considered, XGBoost (logistic regression) performs better in predicting excess returns in the long-term analysis (short-term analysis). Results provide evidence for the benefits of both the analytics and the machine learning methods and raise further discussion on the semistrong market efficiency.

Purpose There is no research on understanding the difference in the nature of volatility and what it entails for the underlying relationship between foreign institutional investors (FII) flows and stock market movements. The purpose of this paper is to explore how permanent and transitory shocks dominate the common movement between FII flows and the stock market returns. As emerging markets are a major destination of international portfolio investments, the author uses India as a perfect case study to this end. Design/methodology/approach The paper uses the permanent-transitory as well as a trend-cycle decomposition approach to gain further insights into the common movement between foreign institutional investors (FII) flows and the stock market. Findings When the author identifies innovations based on their degree of persistence, transitory shocks dominate stock returns, whereas permanent shocks explain movements in foreign institutional investors (FII) flows. Also, stock returns have a larger cyclical component compared to cycles in foreign flows. The authors find the sharp downward (upward) movement in the stock market (FII flows) cycle in the initial period of the COIVD-19 pandemic was quickly reversed and currently, the stock market (FII flows) is historically above (below) the long-term trend, hinting at a correction in months ahead. The authors find strikingly similar stock market cycles during the global financial crisis and COVID-19 period. Research limitations/implications Evidence suggests the presence of long stock market cycles – substantial and persistent deviations of actual price from its fundamental (trend) value determined by the shared relationship with foreign flows. This refutes the efficient market hypothesis and makes a case favoring diversification gains from investing in India. Further, transitory shocks dominate the forecast error of stock market movements. Thus, the Indian market provides profit opportunities to foreign investors who use a momentum-based strategy. The author also finds support for the positive feedback trading strategy used by foreign investors. Practical implications There is a need for policymakers to account for the foreign undercurrents while formulating economic policies, given the findings that it is the permanent shocks that mostly explain movements in foreign institutional flows. Further, the author finds only stock markets error-correct in response to any short-term shocks to the shared long-term relationship, highlighting the disruptive (though transitory) role of FII flows. Originality/value Unlike existing studies, the author models the relationship between stock market returns and foreign institutional investors (FII) flows by distinguishing between the permanent and transitory movements in these two variables. Ignoring this distinction, as done in existing literature, can affect the soundness of the estimated parameter that captures the nexus between these two variables. In addition, while it may be common to find that stock market returns and FII flows move together, the paper further contributes by decomposing each variable into a trend and a cycle using this shared relationship. The paper also contributes to understanding the impact of COVID-19 on this relationship.

We examine the interactive link between oil prices and the stock market in the 4 selected South Asian countries using a Nonlinear Autoregressive Distributed Lag (NARDL) model for 1997–2018. We find a positive relationship between the world oil price and stock market index, and the response of the stock market index to positive and negative oil price shocks is asymmetric. Our results further reveal that higher oil prices in the world market stimulate stock price, suggesting that the South Asian countries do not follow the Efficient Market Hypothesis (EMH). We recommend that the policymakers take initiatives to make the South Asian stock market more efficient by removing the barriers to stock market development, developing the country’s infrastructure, enhancing the stock market’s capacity, and restoring the confidence of the market participants within the region.

In this study, the effects of COVID-19 (mortality rate, case rate, and bed capacity) on the stock market was examined within the framework of the efficient market hypothesis. Unlike other studies in the literature, we used the variable of bed capacity besides the mortality rate and case rate variables. The relationship between the mentioned variables, using daily data between December 31 of 2019 and November 10 of 2020, has been analyzed with time-varying symmetric and asymmetric causality tests for China, Germany, the USA, and India. Considering that the responses to positive and negative shocks during the pandemic process may be different and that the results may change depending on time, time-varying symmetric and asymmetric causality tests were used. According to the time-varying symmetric causality test, stock markets in all countries were affected in the period when the cases first appeared. A causal relationship between COVID-19 and country stock markets was found. The results showed that the effects of the case rate and bed capacity on the stock market occurred around the same time in Germany and the United States; however, these dates differed in China and India. According to time-varying asymmetric causality test findings, the asymmetric effect of the pandemic on the stock market in countries emerged during the second wave. The findings showed that the period during which positive and negative information about the pandemic intensified coincided with the period during which the second wave occurred; besides, the results show the effect of this information on the stock market differed as positive and negative shocks.

Conservatism in the CAPM and L-CAPM standards often emphasizes systematic risk to explain the phenomenon of the risk-return relationship and ignores idiosyncratic risk with the assumption that the risk can be diversified. The effect of the Covid-19 outbreak raises the question of whether the idiosyncratic risk can still be ignored considering that the risk has a close relationship to firm-specific risk. This study sets a portfolio consisting of 177 active public firms in the Indonesia Stock Exchange before and after the Covid-19 pandemic. On portfolio set, idiosyncratic risk is estimated by the standard CAPM and L-CAPM in the observation range from January 2, 2019, to June 30, 2021. The results of the analysis show that L-CAPM and CAPM produce significantly different idiosyncratic risks. Empirical evidence shows that the highest firm-specific risk is in the third period and has a stable condition since the fourth period. This condition is confirmed by regression results that idiosyncratic risk together with systematic risk positively affects stock returns in the fourth period as suggested by the efficient market hypothesis. Uniquely, both systematic risk and idiosyncratic risk based on L-CAPM do not show a significant effect on stock returns in the fifth period, so it is a strong indication that liquidity is an important factor that must be considered in making investments. © Winston Pontoh, Novi Swandari Budiarso, 2021

This study examined the response of stock prices on the Indonesia Stock Exchange (IDX) to COVID-19 using an event study approach and the GARCH model. The research sample is the closing price of the Composite Stock Price Index (JCI) and companies that are members of LQ-45 in the 40-day period before the COVID-19 incident, 1 day during the COVID-19 incident (March 2, 2020) and 10 days after, January 6, 2020 – March 16, 2020. Empirical findings prove that abnormal returns react negatively to COVID-19, JCI volatility fluctuates widely during the COVID-19 event, and the GARCH(1,2) model can be used to assess volatility and predict stock abnormal returns in IDX in market conditions infected with COVID-19. The practical implication of the study’s findings for investors is that the COVID-19 event caused stock price volatility, which affects abnormal returns. Therefore, to face the conditions of uncertainty and increased volatility in the future, several lines of risk management are needed in managing a stock portfolio. In addition, it also opens up opportunities for speculators to profit in an inefficient market environment. This study is based on the empirical literature currently being developed to investigate the phenomenon of stock price volatility behavior during COVID-19 on the IDX. The GARCH model used proves that during the COVID-19 pandemic, stock price volatility increases and leads to a decrease in abnormal returns. The empirical findings also validate the efficient market hypothesis theory related to the study of events and the theory of financial behavior related to uncertainty.

This paper investigates modeling the conditional volatility of the Bangladesh equity market, namely the Dhaka Stock Exchange benchmark index (DSEX) and the Shariah Index (DSES), to explore the presence of leverage effects and long memory behavior covering the period from July 01, 2004 to December 31, 2020. We employ a family of Fractionally Integrated GARCH models FIFARCH BBM, FIGARCH CHUNG, FIEGARCH, FIAPARCH BBM, FIAPARCH CHUNG, and HYGARCH to capture both asymmetric effects and long memory behavior in conditional variance, a unique study in volatility literature. We detect strong evidence in favor of asymmetric effects and long memory behavior in the conditional volatility of DSEX and DSES returns, which repudiates the weak-form efficient market hypothesis. The study reveals FIEGARCH and FIAPRACH CHUNG outperform the other fractionally integrated GARCH specifications in modeling conditional volatility of equity returns. The paper further examines the diagnostic test of misspecification of the conditional variance equation based on the news impact curve, and results ensure that all models are fairly specified. This study also looks into the risk-return tradeoff in time-varying volatility and finds no evidence of the positive relationship between equity returns and volatility dynamics. The findings have pragmatic implications for retail and wholesale investors and other market players to initiate the investments and hedging strategies before investing in an emerging equity market like Bangladesh.

The main goal of this paper is to investigate the random walk hypothesis in Fiji using monthly data from January 2000 to October 2017. Applying augmented Dickey Fuller (ADF 1979, 1981) and Phillips-Perron (1988), Zivot-Andrews (1992), and Narayan and Popp (2010) unit root tests, this study finds that stock prices is best characterized as non-stationary. The estimated multiple structural break dates in the stock prices corresponds with devaluation of Fijian dollar by 20 percent in 2009 and General Elections in September 2014, which Fiji First Party won by majority votes. The empirical results indicate that stock prices are best characterized as a unit root (random walk) process, indicating that the weak-form efficient market hypothesis holds in Fiji’s stock market. Hence, it will be difficult to predict future returns based on historical movement of stock prices in Fiji’s stock market.

In an asset market without bubbles, meaning the strong efficient markets hypothesis is satisfied, the price and dividend should be cointegrated. However, standard unit root tests have low power against a class of Periodically Collapsing Rational Bubbles introduced by (Evans, Am Econ Rev 81:922–930, 1991), which are an intuitive model of speculative behavior. The cryptocurrency markets for bitcoin, ethereum, and ripple do not have dividends, so the tests are conducted using five different proxies for fundamentals. In most cases the price and fundamental data are integrated of order one, according to a minimum LM test for unit roots that allows for breaks. Using a robust test for cointegration that controls for the skewness and excess kurtosis that could arise with such bubbles, one cannot reject the presence of Period Collapsing Rational Bubbles in any of the cryptocurrency markets. The distribution of such tests is non-standard, so significance levels are determined with Monte Carlo experiments.

The capital asset pricing model (CAPM) is an influential paradigm in financial risk management. It formalizes mean-variance optimization of a risky portfolio given the presence of a risk-free investment such as short-term government bonds. The CAPM defines the price of financial assets according to the premium demanded by investors for bearing excess risk.

This research intends to explore the presence of the “turn-of-the-month-effect (TOME)” in the Pakistani stock market. The TOME is the temporary increase in prices of registered shares on the last operating day of the month and the initial 3–4 days of the following month. The selection incorporates the secondary data, which comprises the ending prices of the “KSE-100 Index” for 2013–2018. Contrary to the previous evidence in Pakistan, we run an in-depth year-wise analysis and report an interesting fact that the TOME is significant only during 2013–2016, while it vanishes for 2017 and 2018. We suggest that the “turn-of-the-month” anomaly may disappear during stock market crisis times. The research contains significant importance for potential shareholders because a rational shareholder considers several measures while making his investment decisions and constructing hedging strategies.

This paper investigated how food and beverage (F&B) stocks react to COVID-19. The event study method was applied to four events, including the first and second events were the first COVID-19 positive patients detected in the largest and second-largest economic center of Vietnam. The third and fourth events are related to strong measures to prevent the spread of COVID-19: The nationwide lockdown at the beginning of the second quarter of 2020, and the lockdown of Danang at the beginning of the third quarter of 2020. The results show that the reaction of F&B stock prices to events supports the semi-strong form of efficient market theory. The strong and lasting negative reaction of F&B stocks to the first event can be explained by surprise (first case in Vietnam) and Hochiminh city's economic engine driving role in the development of Vietnam's economy. The study finds that heuristic decision-making from nationwide lockdowns (suppression of supply chains during lockdowns) can explain the sub-sector of farming-fishing-ranching products reacted more strongly to the lockdown event in Danang. Based on the research results, this paper provides some policy implications for managers and notes for securities investors. © 2021 LLC CPC Business Perspectives. All rights reserved.

Purpose The purpose of this paper is to examine the impact of dividend announcements on the stock return of Shariah-compliant and conventional stocks. Design/methodology/approach An event study methodology is applied to study the beta anomaly. Market-adjusted return model, mean-adjusted return model and market model have been applied to calculate excess returns. Estimation period used in this study is 130 days, and event period consists of 21 days in total, i.e. starting from the day –10 “before the cash dividend announcement” to day +10 “after the cash dividend announcements. Findings It has been concluded from the results that dividend plays an informational role in the Pakistan Stock Exchange. As the investors in Pakistan react favorably to the dividend increase announcements and unfavorably to the dividend decrease announcements, they consider dividend increase announcement as good news and dividend decrease announcement as bad news. Practical implications The findings of this study have several implications for different participants of the stock market, such as investors, academicians, researchers, fund managers and policymakers. They can use this information to make decisions while making efficient portfolios. Investors may get abnormal returns by focusing on the dividend announcement patterns. This can influence the attitude of investors toward efficient investments in the stock market and ultimately contribute to the betterment of society. This study is also beneficial for academicians and researchers, as it provides a comparative analysis of Shariah-compliant and conventional stocks and the anomalous effect of dividend announcements on stock return. Originality/value Limited research in the world’s context and null is available in Pakistani context on the subject matter. The comparative analysis of “Shariah-compliant” and “conventional” stocks provides insight into the asset pricing of Shariah-compliant stocks that have not been explored earlier. This study also uses three different methods (mean model, market model and market-adjusted return models) to compare Shariah-compliant and conventional stocks

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.

We empirically test the weak-form of the Efficient Market Hypothesis on Japanese equity markets with trading strategies timing both large and small capitalization portfolios. We find some of the active trading strategies outperform respective buy-and-hold benchmarks. The timing signals were based on sample entropy algorithms, where low sample entropy calls for long positions, while high sample entropy signals for short positions. Our results provide new empirical evidence against the Efficient Market Hypothesis based on the Japanese equity market data.

The market price-earnings ratios differ from those of each share. Despite allowing for several pertinent analyses, authors have rarely addressed these valuation ratios in the Brazilian context. We can use it to evaluate whether the stock market is overvalued (undervalued). In this article, we analyze the mean reversion in a price-earnings ratio based on Ibovespa and identify periods of overvaluation (undervaluation) in the Brazilian stock market. We considered the period from December 2004 to June 2018. Until then, there are no studies that sought to identify periods of overvaluation (undervaluation) in this market. In the analyses, we used non-linear econometric methods. We analyzed the mean reversion in the price-earnings ratio using a unit root test that incorporates a Fourier function in the deterministic term. We identified the periods of market overvaluation (undervaluation) through the regime probabilities obtained from a Markov Switching model, estimated with the price-earnings ratio. The results evidenced that the price-earnings ratio based on the Ibovespa has a non-linear trend and exhibits mean reversion. Thus, this valuation ratio should provide information on the future stock market returns, mostly when it is very dispersed in relation to historical standards. We identified four periods of market overvaluation interposed with five periods of market undervaluation. Mean reversion in the price-earnings ratio contraposes the Efficient Markets Hypothesis. There are no other applications of unit root tests with a Fourier function in the Brazilian context. Furthermore, adopting a Markov Switching model to identify periods of market overvaluation (undervaluation) consists of a methodological contribution. Investors can take advantage of the identification of these periods to establish investment strategies. RESUMO Os índices preço-lucro de mercado diferem daqueles de cada ação. Apesar de possibilitarem várias análises pertinentes, raramente, esses índices foram abordados no contexto brasileiro. Eles podem ser utilizados para avaliar uma sub/sobrevalorização do mercado de ações. Este estudo objetivou analisar a reversão à média em um índice preço-lucro baseado no Ibovespa, assim como, utilizando dele, identificar momentos de sub/sobrevalorização do mercado de ações brasileiro. O período considerado foi de dezembro de 2004 a junho de 2018. Até então, não havia estudos que identificassem momentos de sub/sobrevalorização desse mercado. Nas análises, foram adotados métodos econométricos não lineares. A reversão a média do índice preço-lucro foi analisada mediante um teste de raiz unitária que incorpora uma função Fourier no termo determinístico. Os momentos de sub/sobrevalorização foram identificados por meio das probabilidades de regime, recuperadas de um modelo Markov Switching estimado com o índice preço-lucro. Os resultados evidenciaram que o índice preço-lucro baseado no Ibovespa tem uma tendência não linear e apresenta reversão à média. Assim, sobretudo, em momentos nos quais esse múltiplo se encontrar notavelmente disperso para os padrões históricos, ele deve prover informação sobre o comportamento futuro do mercado de ações. Foram identificados quatro momentos de mercado sobrevalorizado, intercalando com cinco momentos de mercado subvalorizado. A reversão à média do índice preço-lucro contrapõe a Hipótese de Mercados Eficientes. Não foram encontradas outras aplicações de testes de raiz unitária com função Fourier no contexto brasileiro. Além disso, adotar um modelo de Markov Switching para identificar momentos de sub/sobrevalorização no mercado de ações consiste em uma contribuição metodológica. Investidores podem tirar proveito da identificação desses momentos para estabelecer estratégias de investimento.

Examining the daily Dow Jones Industrial Average (DJI) we find evidence both of higher-order anomalies and predictability. While most researchers are only aware of the relatively harmless anomalies that occur just in the mean, the first part of this article provides empirical evidence of more dangerous kinds of anomalies occurring in higher-order moments. This evidence casts some doubt on the common practice of fitting standard time series models (e.g., ARMA models, GARCH models, or stochastic volatility models) to financial time series and carrying out tests based upon autocorre- lation coefficients without making proper provision for these anomalies. The second part of this article provides evidence in favor of the predictability of the returns on the DJI and, more interestingly, against the efficient market hypothesis. The special value of this evidence is due to the simplicity of the involved methods.

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.

The efficient market hypothesis implies that no investor can get an abnormal return. This hypothesis has become a research topic that many researchers refer to. However, this hypothesis is strongly refuted after the discovery of several anomalies that are inconsistent with the efficient market hypothesis. One of them was found by De Bondt and Thaler (1985), that stock prices have a certain tendency, namely that stocks that perform well in one period will become stocks that perform poorly in the next period. Vice versa. This phenomenon is called overreaction or overreaction. These findings motivated further researchers to apply contrarian strategies to gain an advantage when there was an overreaction. This research is a study that is intended to obtain evidence of the ability of contrarian strategies in obtaining abnormal returns. This study aims to analyze the occurrence of overreaction on stocks on the Indonesia Stock Exchange and to analyze the advantages of implementing a contrarian strategy for investors. This research was conducted at companies listed on the Indonesia Stock Exchange. The companies selected were 100 companies with the most active transactions during 2019. From the results of data analysis, it can be concluded that there was a price reversal for the shares listed on the Indonesia Stock Exchange. This result is quite strong because it has been tested for up to 4 weeks. Despite the price reversal, the contrarian strategy was not able to generate significant returns for investors.Keywords :contrarian strategy, abnormal return, overreaction

PurposeThe purpose of this study to evaluate the evolving market efficiency of the housing market under the framework of adaptive market hypothesis and martingale difference hypothesis taking a case of India.Design/methodology/approachThe study used a wild bootstrap version of the generalized spectral (GS) test in the rolling window framework to measure possible time-varying linear and non-linear dependence in the housing market.FindingsThe study finds that the Indian housing market, in general, is not efficient, and this efficiency is dynamic, which changes with time lending support to the adaptive market hypothesis. The study confirms that the evolutionary model of individuals adapting to a changing environment via behavioural biases affects the efficiency of the housing market, which leads to the evolving efficiency of the housing market prices.Research limitations/implicationsThe study believes that the potential implications go beyond evolutionary forces and the adaptive market hypothesis , which, does not only depend on an individual's decision-making process but also on social psychology. Thus, a further attempt in this line, taking into account the social psychology and quantitative rigour towards drivers of evolving efficiency is suggested for future research.Practical implicationsThe study suggests that there is a possibility of extra returns for market players, but not always. The Indian housing market has witnessed several landmark reforms in recent years, so it is believed that these reforms would decrease the inefficiency level of this market. Contrary to this, the study’s findings reveal an increase in the inefficiency level in recent years. As the Indian housing market shows evolving efficiency, it is believed that the increased inefficiency is temporary. The increased inefficiency can be regarded as the settlement stage of the various policy and technical reforms.Originality/valueConfirming the presence or absence of adaptive efficiency in the housing market under possible non-linear dependence will be a significant addition to the existing literature.

This article helps resolve the current unsatisfying and inclusive studies covering the efficiency of stock markets in developing countries. Previous studies have used limited data and partial stati...

This paper presents the results of the study of the fulfillment of the key conditions and prerequisites of the hypotheses of the efficiency and fractality of price behavior in financial markets for the period 1997–2021. Its relevance is due to the high volatility of the Russian stock market and its imperfections, which lead to significant price deviations. On the example of the analysis of the dynamics of the MOEX stock index, the method of testing the dynamics of prices on large arrays of real data with the use of statistical data processing methods and modern information technologies is demonstrated. The article concludes that the nature of the Russian market as a whole has a fractal character. At the same time, the assumptions underlying the hypothesis of information efficiency of the market are not fulfilled.

Purpose This study aims to evaluate the short-term impact of brokerage analysts’ recommendations on abnormal returns using a sample selected from the S&P BSE 100 in the Indian context. The efficient market hypothesis, specifically, its semi-strong form, is tested for “Buy” stock recommendations published in the electronic version of Business Standard. The crucial issue is, are there any abnormal returns that can be earned following a recommendation? If so, how quickly do prices incorporate the information value of these recommendations? It tests the impact of analyst recommendations on average abnormal returns (AARs) and standardized abnormal returns (SRs) to determine their statistical significance. Design/methodology/approach Using a sample of stock recommendations published in the e-version of Business Standard, the event study methodology is used to determine whether AARs and SRs are significantly different from zero for the duration of the event window by using several significance tests. Findings The findings indicate a marginal opportunity for profit in the short term, restricted to the event day. However, the effect does not persist, i.e. the market is efficient in its semi-strong form implying that investors cannot consistently earn abnormal returns by following analysts’ recommendations. Post the event date, the market reaction to analyst recommendations becomes positive, however, insignificant until the ninth day after the recommendation providing support to the underreaction hypothesis given by Shliefer (2000) and post-recommendation price drift documented by Womack (1996). The study contributes by using different statistical tests to determine the significance of returns. Practical implications There are important implications for traders, investors and portfolio managers. The speed with which market prices incorporate publicly available information is useful in formulating trading strategies. However, stock characteristics such as market capitalization, volatility and level of analyst coverage need to be incorporated while making investment decisions. Originality/value The study contributes by using different statistical tests to determine the significance of returns.

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.

Do equity prices efficiently reflect fundamental information, as the efficient markets hypothesis (EMH) suggests? The author challenges financial academicians’ widely held acceptance of the EMH. In a frictionless environment, information acquisition and trading would be costless, transaction prices would reflect information perfectly, prices would follow random walks, and the EMH would be validated. But markets are not frictionless. Academic research commonly invokes an assumption that informed investors have homogeneous expectations. But, given the enormity and complexity of information sets, investor expectations differ. Taking an intraday, microstructure focus, the author explains that price discovery in a nonfrictionless, divergent-expectations environment is a protracted, dynamic process that accentuates intraday price volatility and introduces return autocorrelations. This counters the EMH. He stresses the importance of instituting a market structure that further enhances the operational, and therefore informational, efficiency of a security market. TOPICS:Security analysis and valuation, portfolio theory, statistical methods, exchanges/markets/clearinghouses Key Findings ▪ Given the enormous size and complexity of information sets, equally informed investors form different expectations of stocks’ risks and returns. Consequently, shares do not have unique fundamental values that can be known by research analysts. Rather, prices must be discovered in a marketplace, and the efficiency with which this task is performed depends on how orders are handled and turned into trades (i.e., market structure matters). ▪ In a frictionless, zero-trading-cost market, security prices depend on two factors: risk and return. In a nonfrictionless market, three factors matter: risk, return, and liquidity. Illiquidity is closely associated with price discovery being a noisy, dynamic process. ▪ High-frequency, intraday data show that intraday price volatility is markedly accentuated and that stock returns are autocorrelated (i.e., share prices do not follow random walks). These properties of intraday price formation are manifestations of price discovery being a noisy process, and they explain why share prices can be informationally inefficient.

A vast literature on putative market inefficiencies compares the results of an investment strategy which takes advantage of the putative inefficiency against a null hypothesis generated by the efficient market hypothesis (EMH). Even if negative, such studies do not provide direct evidence in favor of the EMH. To directly assess a key component of the EMH, namely that stock returns lack memory, we created 30-year portfolios by sampling annual market returns from 1926-2019 with replacement, and then compared the results with the historical record of actual 30-year returns. Although centered on the correct amount, the EMH-based 30-year returns were notably more variable than the historical 30-year returns. One possible explanation is that market returns regress toward their mean in the long term. This demonstrates that while the EMH should be taken seriously, it need not always be taken literally.

The announcement of the Domestic Market Obligation (DMO) coal price policy becomes the signal for investment decision making. The event was an announcement related to the government that can affect shares in the capital market. The form of capital market efficiency knows how equal the information that investors can absorb and the signal that indicates investors’ response, whether it is positive or negative. This research is a descriptive event study that uses twenty-one samples of coal mining subsector companies to determine capital market reactions to the Domestic Market Obligation (DMO) coal price policy announcement. During the observation period, there was a significant market reaction with a marked abnormal negative return. There is a leak of information before implementing policy, which makes the form of capital market efficiency is semi-strong form. Also, this is caused by the investor, which gets the difference of information degree based on the market efficiency hypothesis. The next research can use different event windows to increase the knowledge about the effect of the announcement of the Domestic Market Obligation (DMO) coal price policy towards market reaction.

The severe acute respiratory syndrome (SARS) coronavirus or Covid-19 has affected the world unprecedentedly. Malaysia is not exempted from its impact. The Malaysian government announced a nationwide lockdown in the middle of March 2020. The magnitude of the outbreak had caused panic to the public and financial panic in the stock market. This study examined the impact of Covid-19 cases and the action taken by the government through movement control orders (MCOs) and economic stimulus packages in the stock market. Event study methodology was used to assess the impact of Covid-19 on stock returns in Bursa Malaysia. Consistent with the efficient market hypothesis, the study found that during the early stages of the MCOs, the cumulative average abnormal returns (CAAR) reflected significant negative returns. However, it showed positive returns after MCO 3 and MCO 4. The results implied that the market perceived that the pandemic was under control. The study also revealed a significant relationship between CAAR and the number of cases announced, supporting the notion that in a less to a moderately free country such as Malaysia, investors showed a certain lack of trust in the number of cases reported by the authorities, and thus overreacted to the number of reported cases. The stimulus packages that were expected to stabilise the economy and society were found to be positively significant during the early stages of the MCOs.

This paper examines the efficiency of the Indian Stock Markets (NSE) during the time of COVID. It demonstrates the impact on the market on the announcement of two major events that is the declaration of COVID as a Public Health Emergency Of International Concern (PHEIC) on 30th January 2019 and the day when Prime Minister Narendera Modi declared first lockdown in India, 24th March 2019. The study uses the Event Study methodology to determine the efficiency of the markets. The study found that the markets were in fact inefficient during the period under study and that there were numerous opportunities to make abnormal profits. The study also conducted a sector wise comparison to analyze the impact of the above mentioned events and found a major difference in the way each sector was affected by the news, indicating different levels of efficiency in the semi strong form of market. The results of this research helps one to understand investor behavior and biases and the different opportunities one could make use of, in order to make abnormal profits.

PurposeThe purpose of the study is to investigate the possible role of annual report readability in accrual anomaly, shedding light on why investors fail to incorporate accruals information in a timely and unbiased manner beyond the original naive investor fixation explanation.Design/methodology/approachUsing five proxies of annual report readability and available data over 1993–2017, we investigate whether accrual overpricing is more severe when annual reports are less readable.FindingsWe find little (substantive) evidence of accrual overpricing among high (low) readability firms. The readability effects are contingent on the level of business complexity and earnings management.Research limitations/implicationsThis study extends the original naive investor fixation explanation and documents annual report complexity as a market friction in explaining the accrual anomaly, contributing to the mispricing vs risk debate and supporting the efficient market hypothesis.Practical implicationsLow readability of annual reports is a red flag to investors.Social implicationsThis study provides support for regulatory initiatives aimed at enhancing readability of corporate disclosures to address market frictions and improve market efficiency.Originality/valueAccrual anomaly has posed a challenge to the efficient market hypothesis. This study draws on and adds to the line of research indicating that annual report complexity is a friction erecting a barrier to transparency, hindering market efficiency. This study contributes to our understanding of the enigmatic accrual anomaly.

This study tested the efficient-market hypothesis (EMH) to examine information efficacy in the cryptocurrency market. We conducted three random walk tests to verify the weak-form EMH and used the e...

Weekend effect is a form of inefficiency that makes stock returns are not random (predictable) and repetitive which is against the efficient market theory by Fama (1991). This study aims to encourage stock investor knowledge about these anomalies, and act more measurably, so that a more efficient market can be achieved. This study uses a regression method that is looking for a significant value between days against the daily return index with the aim of finding a trading pattern on a particular day, especially on Monday and Friday. As a result, the weekend effect occurs during the post-crisis impact on the real sector, in other words affect the performance of the company's stock returns as a whole so that the global financial crisis that is post-crisis 2007-2008 has a negative statement on the weekend effect.Keywords: weekend effect; post crisis; return; efficient market; anomaly market

Adaptif piyasa hipotezi (APH) güncel finansal literatürde belirgin bir ilgi görmektedir. Bu durum APH’nin yine finansal literatürde sıklıkla araştırma konusu olan etkin piyasa hipotezine bir alternatif olarak ortaya çıkmış olması ile bağlantılıdır. Bu doğrultuda çalışmada, ilk olarak Borsa İstanbul hisse senedi piyasası BIST100 endeksi için APH, getiri öngörülebilirliğinin test edilmesi yoluyla incelenmiştir. Bu bağlamda Ocak 1988 - Aralık 2017 arası günlük kapanış fiyatı verilerine otomatik portmanteau ve genelleştirilmiş spektral (GS) testleri uygulanmıştır. Analizin devamında bu testlerin sonuçları, getiri öngörülebilirliği sağlayan dönemleri incelemek için bir gizli Markov model (GMM) uygulamasında kullanılmıştır. Sonuçlara göre Borsa İstanbul’un APH'ne güçlü bir şekilde uyum sağladığı görülmüştür. Ek olarak, GMM uygulamasının sonuçları, endeksin belirleyicileri ile ilgili olarak da periyodik öngörülebilirliği doğrulamıştır., The adaptive market hypothesis (AMH) has recently attracted significant interest in the financial literature. The AMH has started to be considered an alternative to the efficient market hypothesis. In this respect, this study, first of all, examines the AMH for the BIST100 index of Turkey’s Borsa Istanbul stock exchange market by testing the return predictability. The applications are performed via automatic portmanteau and the generalized spectral (GS) tests using daily closing price data between January 1988 and December 2017. Secondly, the results of these tests are utilized for a hidden Markov model (HMM) application to examine the periods that yield return predictability. According to the results, it is observed that there is strong evidence for the validity of AMH within the scope of Borsa Istanbul’s BIST100. Additionally, the results of the HMM application confirm the periodic predictability regarding the determinants of the index.

Purpose The purpose of this research was to examine the effectiveness of filter rules and investigate the weak form of the efficient market hypothesis (EMH) on sample shares of shariah-compliant vs. conventional banks listed on the Gulf Cooperation Council (GCC) stock market. Design/methodology/approach Nine trading filter strategies with different statistical analyses were used as defined in the literature (Fifield et al., 2005; Almujamed et al., 2018). Daily closing equity prices of a sample of twenty shariah-compliant banks and twenty conventional banks were recorded over the 18-year period ending 31 December 2017. Findings Shares of shariah-compliant banks in the GCC were not weak-form efficient since trading based on past information was predictable, profitable and outperformed the corresponding naïve buy-and-hold trading strategy. Shares of conventional GCC banks underperformed Research limitations/implications This paper’s findings should be useful for central banks and capital market authorities in GCC countries for evaluation when considering new regulations or process changes. Limitations include small sample numbers and need for more recent evaluations of accounting disclosure levels. A wider range of data, statistical analyses and other trading strategies is needed. Potential investors (Muslim and non-Muslim), shariah supervisory boards, and preparers of financial statements can benefit from this study. Practical implications The results suggest that selection of trading strategy affects the success of the rule and that mid-sized filters are the best. Originality/value This is an innovative study comparing performance of shariah-compliant and conventional banks under different filter rules.

This research tries to show that information about COVID-19 affects market arousal indicated by the frequency of transactions, and the market performance shown by Jakarta Composite Index (JCI). The theory used for analysis is the prospect theory and efficient market hypothesis (EMH). The results of statistical analysis indicate that information about COVID has a negative effect on JCI, as well as trading volume the previous day. The evidence can briefly prove that there is an effect of COVID-19 and weakening daily transactions on JCI. The research findings show that the JCI market uncertainty is in line with the VUCA and Prospect theory. In this case, it occurs that uncertainty affects the behavior of investors' decision making. Investors' decision-making behavior is accumulated in market behavior, and is subsequently manifested in index changes in accordance with the efficient market hypothesis. The contribution of this research to the study of financial market behavior is that uncertainty and uncertainty faced by investors affect market behavior and changes as measured by the index.

This paper advances the view that the deep confidence of market regulators in the assumptions and premises of the Efficient Market Hypothesis (EMH) has led to the underestimation of market risks, thus inactivating the market education of existing and future investors. Hence, they have not responded to financial illiteracy, which exacerbated the recent financial crisis. Investor education may be considered as a systemic risk management tool for future financial crises and, especially, financial literacy can drive a wedge between the regulation and the prevention of severe financial crises based on expected benefits versus losses. This also will help to regain investors’ trust in the market after the crisis and instill investors with more confidence. This approach has not yet received the attention it deserves. Conclusion: “Our analysis suggests that this combination generated bubbles in financial assets return and that this momentum effect was likely to be strongest in those markets whose interpretation of ambiguous financial information was required. Actions to implement financial education programs would contribute to strengthened financial systems, to environments conductive to financial innovation, and to more rational risk taking. Consistent with this analysis, systemic risk is stronger in markets where financial illiteracy is higher.