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This study investigated the efficiency market theory in four (4) selected African stock markets (Nigeria, South Africa, Kenya and Morocco) proxied by their All-share indices from the perspective of random walk hypothesis using the variance ratio tests. Daily market returns data from 01/02/2012 to 26/03/2020 obtained from the individual national stock markets via their official websites was employed. The findings of the study evince that over the study period, the daily returns movement on Nigeria stock exchange All-share index is affected by historical price information; hence, Nigeria stock market follows the random walk pattern whereas the daily returns movement on South Africa FTSE-JSE stock exchange index, Kenya (Nairobi) stock exchange index and Morocco (Casablanca) stock exchange index are not affected by historical price information; hence, South Africa, Kenya and Morocco stock markets do not follow the random walk pattern. We therefore conclude that African stock markets are largely inefficient; hence, they are characterized by market anomalies and momentum effects implying that financial resources are not efficiently and effectively mobilized. Also, there is lack of evidence of weak form efficiency in African markets which also implies the existence of arbitrage opportunities which would lead to abnormal returns or profits if well exploited. From the findings of this study, we recommend amongst others that there is need for investors and traders in the African stock markets to exploit the existing arbitrage opportunities that are created by market anomalies in order to possibly beat the stock markets and earn abnormal returns. This can be achieved by using market trading strategies that are consistent with technical analysis such as day-of-the week momentum strategy.

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.

Despite the rise in markets for cryptocurrencies at an outstanding pace, with consistently high trading volume and market capitalization, the increasing volatility of the virtual currencies raise various concerns. One of the major concerns is regarding (in)efficiency, viz. whether there exist opportunities of making excess returns based on out-performing the market or merely a game of chance. In this study, the authors investigate the weak-form efficiency of the top-ten cryptocurrencies using non-parametric and parametric random walk testing methods that are robust to unknown structural breaks and asymmetric effects. The findings do not support the random walk hypothesis, hence validating the weak-form inefficiency for daily cryptocurrencies returns. This can be attributed to the presence of asymmetric volatility clusters. This study has significant implications for portfolio managers, market participants and regulators of leading cryptocurrency markets.

The Random Walk Hypothesis (RWH) states that stock prices move randomly in the stock market without following any regular or particular pattern and as such historical information contained in the past prices of stocks cannot be used to predict current or future stock prices. Hence, stock prices are unpredictable and that investors cannot usurp any available information in the market to manipulate the market and make abnormal profits. This study empirically examines the random walk hypothesis in the Nigerian stock market using the daily quotations of the Nigerian stock exchange from 2nd January, 1998 to 31st December, 2019. The study employs Augmented Dickey-Fuller unit root test, the random walk model, Ljung-Box Q-statistic test for serial dependence, runs test of randomness, and the robust variance ratio test as methods of analyses. The result of the study rejected the null hypotheses of a unit root and random walk in the stock returns. The null hypothesis of no serial correlation in the residuals of stock returns was also rejected indicating the presence of serial correlation/autocorrelation in the residual series. The result of the runs test rejected the null hypothesis of randomness in the Nigerian stock returns. The results of the variance ratio test under homoskedasticity and heteroskedasticity assumptions both strongly rejected the null hypothesis of a random walk for both joint tests and test of individual periods. Based on the results of the four tests applied in this study, it is concluded that the Nigerian daily stock returns under the period of investigation do not follow a random walk and hence the null hypothesis of a random walk is rejected. The results of the study further revealed that the Nigerian stock market is weak-form inefficient indicating that prices in the Nigerian stock market are predictable, dependable, consistently mispriced, inflated, liable to arbitraging and left unprotected to speculations and market manipulations. The study provided some policy recommendations

The Ottoman Empire introduced paper money called kaime which was also a bill of exchange bond to bearer in order to finance the reforms of the Tanzimat and to overcome the financial and fiscal difficulties of the previous period, and adopted a foreign exchange stability policy and a fixed Exchange rate system to stabilize its currency which gradually lost its value against the foreign currencies due to ongoing adulterations. Related to the developments that took place over time, the monetary policy of the government has also changed; interest-free paper money was eventually introduced to the market by decreasing the interest rates gradually. Due to the Crimean War and the economic and financial difficulties experienced during the war, the amount of paper money in the market was increased uncontrollably. The fact that the money market in the Ottoman Empire was not sufficiently organized and the weakness of the state control over the market caused intensive speculative activities to be carried out by the bankers and brokers who took on intermediary duties in the market. Following the Crimean War, the increasing influence of Western powers on the Ottoman finance was a factor that restricted the speculative activities. The Random Walk Hypothesis suggests that the future prices cannot be predicted using the current information, thus speculative gains will not be possible. In this study, the Random Walk Hypothesis in the paper money market and the Exchange rate market in the Ottoman Empire are analyzed with reference to economic and historical facts. For this purpose, Variance Ratio Test and unit root test with structural break were adopted. The results of the analysis, on a large scale concluded that the Random Walk Hypothesis is valid in both markets and that there are economic and political developments behind the structural breaks.

This paper presents an up - to - date account of market operations of the Ho Chi Minh Stock Exchange and examines its informational efficiency in recent years. The daily closing prices and rates of return of VN Index – the major market index of Ho Chi Minh Stock Exchange and 10 stocks chosen from different sectors are employed, from 2 January 2018 to 31 December 2019, to investigate the random walk hypothesis of market efficiency using the Lo - MacKinlay variance ratio test and Chow - Denning multiple variance ratio test. Our results show that the market index and individual sample stocks conform to the null hypothesis of a random walk type 3 model of a weak form market efficiency. The paper also presents the results of an Event Study to examine the semi - strong form market efficiency of the HOSE. The empirical results on this type indicate that there are significant abnormal returns and significant cumula tive abnormal returns by trading the stocks around the events. These results are inconsistent with the requirements of a semi - strong form market efficiency, and it thus appears that further improvements in transmission of information and its speed within this market are needed to further improve the efficiency of this emerging market.

This study re-examined the traditional research topic in finance—the efficient market hypothesis (EMH) within the context of a nonlinearity unit root test using daily data sourced on the Nigerian economy. This was premised on two key motivations. First, the study observed that most of the existing studies on EMH are based on an aggregate stock index and the presence of heterogeneity of listed firms on the floor of the exchange can make the results obtained from aggregate stock price-based tests misleading due to spuriousness. To overcome this, the study tested the validity of EMH at a sectorial level. The second motivation centers on the observed nonlinear property of the time series data used in the existing literature. The study first examines the unit root properties of the data by applying the Harvey, Leybourne, and Xiao (2008) methods. The results indicate rejections of the null hypothesis for all the series, an indication that stock market indices in Nigeria are nonlinear and asymmetric in nature. This suggests that results obtained from linear based models could be biased. In order to achieve more accurate results, the study applied the ESPAR model and observed that, overall, there is an abundance of evidence to show that the Nigerian stock exchange is mean reverting, thus investors are advised to adopt a contrarian investment strategy to maximize the opportunities in the market.

Research background: Covid-19 has affected the global economy and has had an inevitable impact on capital markets In the week of February 24-28, 2020, stock markets crashed The index FTSE 100 decreased 13%, while the indices DJIA and S&P 500 fell 11-12%, the biggest drop since the 2007-2008 financial and economic crisis It is therefore of interest to test the random walk hypothesis in developed capital markets, European and also non-European, in order to understand the different predictabilities between them Purpose of the article: The aim is to analyze capital market efficiency, in its weak form, through the stock market indices of Belgium (index BEL 20), France (index CAC 40), Germany (index DAX 30), USA (index DOW JONES), Greece (index FTSE Athex 20), Spain (index IBEX 35), Ireland (index ISEQ), Portugal (index PSI 20) and China (index SSE) for the period from December 2019 to May 2020 Methods: Panel unit root tests of Breitung (2000), Levin et al (2002) and Hadri (2002) were used to assess the time series stationarity The test of Clemente et al (1998) is used to detect structural breaks The tests for the random walk hypothesis follows the variance ratio methodology proposed by Lo and MacKinlay (1988) Findings & Value added: In general, we found mixed confirmation about the EMH (efficient market hypothesis) Taking into account the conclusions of the rank variance test, the random walk hypothesis was rejected in the case of stock indices: Dow Jones, SSE and PSI 20, partially rejected in the case indices: BEL 20, CAC 40, FTSTE Athex 20 and DEX 30, but accepted for indices: IBEX 35 and ISEQ The results also show that prices do not fully reflect the information available and that changes in prices are not independent and identically distributed This situation has consequences for investors, since some returns can be expected, creating opportunities for arbitrage and for abnormal returns, contrary to the assumptions of random walk and information efficiency © 2020 Odessa National Academy of Food Technologies All rights reserved

This study intends to analyse efficiency, in its weak form, in the financial markets of Indonesia, Malaysia, Philippines, Singapore, Thailand (Asean-5), and China, during the global pandemic (Covid-19). Different approaches have been undertaken to carry out this analysis in order to determine whether: Asean -5 financial markets and China are efficient, in their weak form, during the analysis period? The results indicate that the random walk hypothesis is rejected in all markets. The values of the variance ratios are, in all cases, lower than the unit, which implies that the returns are autocorrelated over time and, there is a reversion to the average, in all indices.In corroboration, the exponents Detrended Fluctuation Analysis (DFA), indicate significant long memories with a larger incidence in the Philippines and Singapore markets, however the Chinese market evidences anti persistence. These results demonstrate that stock prices do not completely reflect the available information and that stock prices movements are not i.i.d. This has implications for investors, as some returns can be expected, creating opportunities for arbitrage and abnormal returns, contrary to the assumptions of random walk and information efficiency. These conclusions also allow market regulators to implement measures to ensure better information in these regional markets.

We study the informational efficiency of the Saudi stock market (SSM), while accounting for corporate governance change, based on single, multiple, and variance ratio-based WALD tests and runs test. The main findings indicate that when the whole period is considered, the random walk hypothesis is rejected, but when divided into two sub-periods separated by the pre-corporate governance and the period marked by corporate governance change, the analysis demonstrates sub-period improvement in weak-form efficiency for the examined series. Robustness of results is verified by analysis using sector indices, which point to market efficiency. Interestingly, Hurst Exponent estimates evidence long-range dependence which suggests the predictability of stock prices and the prospect of speculative opportunities.

Purpose- The purpose of this study is to assess the weak form efficiency of Borsa Istanbul banking sector stocks using bank stocks listed in BIST 30. In addition to individual banking sector stocks, BIST 100 and BIST BANKS indexes are also investigated. Methodology- For this purpose, weekly adjusted closing prices of selected stocks and indexes are collected from finance.yahoo.com and investing.com. The study period covers from January 4, 2010, to December 20, 2019. Therefore, a total of 520 observations for each stock and index are analyzed using autocorrelation, run test and unit root tests such as Augmented Dickey-Fuller (ADF), Phillips-Perron test (PP) and Kwiatkowski-Phillips Schmidt-Shin (KPSS).Findings- The autocorrelation test results indicated that only VAKBAN and YAKBNK are efficient at the weak form of efficiency during the study period. On the other hand, the runs test result showed that only AKBANK and GARAN do not follow the random walk hypothesis and the other six samples are efficient at the weak form of efficiency. Finally, the unit root tests such as ADF, PP and KPSS results indicated that all samples do not follow the random walk hypothesis and they are not efficient at the weak form of market efficiency. BIST 100 and BIST BANKS indexes are inefficient according to all methods except in run test analysis.Conclusion- Consequently, the three types of tests employed in this study exhibited a controversial result and it is difficult to give a general conclusion regarding the efficiency of the BIST Banking sector in the weak form. This indicated the probability of making an abnormal return by examining the Borsa Istanbul banking sector stocks’ historical prices.

While macro models increasingly incorporate substantial risk, the theoretical knowledge about the effect of uncertainty on consumption growth consists of intuitions from the second order log-linearized Euler equation. I show that the derivation of the log-linearized Euler equation is flawed in that it does not consist in linearizing an Euler equation but in linearizing an ad-hoc mathematical identity. I prove exactly that uncertainty raises consumption growth and makes consumption depart from a random walk. I also prove that this precautionary consumption growth is decreasing in assets, and in transitory and permanent income when income is a transitory-permanent process.

Over previous decades, market participants have been unsure about how to forecast the movement of the stock market. Coming up with a good forecasting model could lead stock market participants towards a less risky investment portfolio. This study attempts to explore the haphazard nature of Philippine Stock indices and the long-term relationship between Philippine Stock Exchange (PSE) sectoral indices and the PSE index. The data series used are the daily closing values of the PSE index and six sectoral indices between July 2010 to December 2019. This study employs an Augmented Dickey-Fuller (ADF) unit root test and a Johansen cointegration test. The results revealed that all indices are non-stationary at index level, but stationary at first difference. The results showed that all indices followed a random walk; however, no long-term relationships between the PSE index and five sectoral indices were found. Therefore, long-term investors are able to diversify their portfolio to reduce investment risk.

This paper contributes to the debate on the Permanent Income Hypothesis (PIH) and excess consumption smoothness and sensitivity in the context of conditions in the V4 countries. This paper also shows results contrary to the belief of the Permanent Income Hypothesis/Random Walk Hypothesis that the change in consumption is an innovation which is not predictable by lagged saving or lagged income change. The paper tests the implication of the Permanent Income Hypothesis/Random Walk Hypothesis, using quarterly aggregate data for 1995-2017 in the V4 countries. A vector autoregression for saving and changes in disposable income is used to generate a forecast of declines in disposable income. As a result, when income changes abruptly, the resulting change in consumption is much smoother and conversely, when changes in income are anticipated, consumption responds sensitively. The aggregate consumption is both excessively smooth relative to the new information causing consumers' revision of previous expectations about current and future income, and excessively sensitive to lagged income growth. info:eu-repo/semantics/openAccess

Purpose The algorithmic trading has advanced exponentially and necessitates the evaluation of intraday stock market forecasting on the grounds that any stock market series are foreseen to follow the random walk hypothesis. The purpose of this paper is to forecast the intraday values of stock indices using data mining techniques and compare the techniques’ performance in different markets to accomplish the best results. Design/methodology/approach This study investigates the intraday values (every 60th-minute closing value) of four different markets (namely, UK, Australia, India and China) spanning from April 1, 2017 to March 31, 2018. The forecasting performance of multivariate adaptive regression spline (MARSplines), support vector regression (SVR), backpropagation neural network (BPNN) and autoregression (1) are compared using statistical measures. Robustness evaluation is done to check the performance of the models on the relative ratios of the data. Findings MARSplines produces better results than the compared models in forecasting every 60th minute of selected stocks and stock indices. Next to MARSplines, SVR outperforms neural network and autoregression (1) models. The MARSplines proved to be more robust than the other models. Practical implications Forecasting provides a substantial benchmark for companies, which entails long-run operations. Significant profit can be earned by successfully predicting the stock’s future price. The traders have to outperform the market using techniques. Policy makers need to estimate the future prices/trends in the stock market to identify the link between the financial instruments and monetary policy which gives higher insights about the mechanism of existing policy and to know the role of financial assets in many channels. Thus, this study expects that the proposed model can create significant profits for traders by more precisely forecasting the stock market. Originality/value This study contributes to the high-frequency forecasting literature using MARSplines, SVR and BPNN. Finding the most effective way of forecasting the stock market is imperative for traders and portfolio managers for investment decisions. This study reveals the changing levels of trends in investing and expectation of significant gains in a short time through intraday trading.

Empirical works testing randomness of stock prices are abundant. Such findings, however, can be challenged if time-series datasets examined are subjected to price limits, which, ex vi termini, enforce bounded movements. This article examines the random walk hypothesis for the Malaysian equity market under three price limit regimes from January 1994 to September 2017. Price limits have been active in Malaysia’s solitary bourse since 1989 with periodic revisions. Identifying a sample of 407 actively traded instruments that triggered limits on 5,843 occasions, the authors use parametric (Ljung–Box, Lo and MacKinlay, and Chow–Denning) and nonparametric (Wald–Wolfowitz runs and Broock–Decher–Scheinkman independence) tests to investigate whether prices under different circuit breaker regimes follow a random walk path, an indicator of market efficiency. Upon comparison with the composite FBMKLCI index and sectoral indexes—the bulk of which reject the random walk hypothesis—the study finds considerable support for randomness across all regimes for upper and lower limit-hit stocks. Moreover, progressive tightening of the price limit appears to correspond with a lower proportion of limit-hit stocks following a random path. The findings carry implications for regulators and academia. First, the unusually wide price band in Malaysia appears to outperform the tighter limits studied earlier. Second, the findings furnish direct evidence of price randomness and price discovery in the financial economics literature and provide indirect evidence of circuit breaker efficacy to market microstructure literature. Third, econometric issues arising from disparate results of various tests are indicated, with ramifications for methodological developments. The article concludes with suggestions for future research. TOPICS:Private equity, exchanges/markets/clearinghouses, emerging, statistical methods

This paper examines whether the intertemporal tradeoffs between risk and return explain mean reversion in sovereign CDS spreads. I test how mean reversion prevents the explosiveness of CDS spreads in Europe. The relationship between risk and return has been widely studied in finance. The results show that, during the pre-crisis period, sovereign CDS spread changes were more consistent with the mean reversion hypothesis for most European countries. I also find strong evidence that the intertemporal tradeoffs between volatility and return explain in part the mean reversion in the markets for European CDS. Moreover, I show that during the crisis period, CDS spreads’ changes are consistent with the random walk hypothesis and mean aversion is more important for large holding periods.

This study is the first to investigate the efficient market hypothesis in its weak form and the random walk behaviour of globally listed private equity (LPE) markets represented by nine global, regional, and style indices based on weekly data covering the period from January 2004 to December 2020. Autocorrelation tests, variance ratio tests, and a non-parametric runs test are employed. The results of the autocorrelation tests and the variance ratio tests tend to correspond for all indices, and they reject the random walk hypothesis for the returns of all LPE indices under investigation. In contrast, the runs test for direct weak-form market efficiency cannot reject the null hypothesis of a random walk process for almost all LPE indices under investigation. Furthermore, there is no evidence that the market efficiency of globally listed private equity markets has improved after the global financial crisis. Due to the fact that the rapidly growing asset class of LPE as a form of private equity is still relatively unknown, the implications of the results of our paper are relevant for investors, policy makers, and academics alike. In addition, the results provide valuable insights to better understand the emerging asset class of LPE.