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the informational efficiency of capital markets than on ..

Dragotă, Victor and Mitrică, Eugen (2004) Emergent Capital Markets‟ Efficiency: the Case of Romania, , 155, pp. 353-360.

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The general theory of market efficiency

Event studies, especially those on daily returns, provide the “cleanest” evidence on market efficiency according to Fama (1991). He stresses that the results of the event-study literature focused on corporate finance issues indicate that “on average, stock prices adjust quickly to information about investment decisions, dividend changes, changes in capital structure, and corporate-control transactions”.

28/03/2017 · This article introduces the concept of the efficient markets hypothesis

The MVR test for random walk hypothesis (assuming on a first case homoskedasticity and on the second case heteroskedasticity) shows that this hypothesis cannot be rejected for the most stocks. As a result, the returns cannot be predicted based on information about past stock prices. On the basis of these results, Dragotă et al. (2009) conclude that the weak form of the efficient market hypothesis cannot be rejected.

Emergent capital markets’ efficiency: The case of …

Fama, Eugene F. (1970) Efficient Capital Market: A Review of Theory and Empirical Work25, pp. 383-417.

Even if some money managers are not consistently observed to be beaten by the market, no refutation even of strong-form efficiency follows: with hundreds of thousands of fund managers worldwide, even a normal distribution of returns (as efficiency predicts) should not be expected to produce a few dozen "star" performers.

Some economists, mathematicians and market practitioners cannot believe that man-made markets are strong-form efficient when there are reasons for inefficiency including the slow diffusion of information, the relatively great power of some market participants (e.g., financial institutions), and the existence of apparently sophisticated professional investors.

ROMANIAN CAPITAL MARKET EFFICIENCY: A REVIEW OF EMPIRICAL WORK

Many financial models are based on the efficient capital markets hypothesis

(a) In an efficient market, equity research and valuation would be a costly task that provided no benefits. The odds of finding an undervalued stock should be random (50/50). At best, the benefits from information collection and equity research would cover the costs of doing the research.

Tests for return predictability from past returns (based on tests of serial correlation, unit root tests, normal distribution analysis and trading rules tests) and tests for seasonals in returns have been mainly used to study the Romanian capital market efficiency. The evidence regarding market efficiency on the Romanian capital market is mixed. However, an improvement at the level of the market efficiency can be noticed in the recent years, which can be associated with the aforementioned positive developments.

Informational efficiency of capital markets has been the subject of numerous empirical studies
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  • is an economic theory on the efficiency of capital markets.

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    The efficient capital markets hypothesis (ECMH) is one of the most basic - and influential ..

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Efficiency of Capital Markets Flashcards | Quizlet

According to Hansanov and Omay (2007), finding of a unit root implies that stock prices follow a random walk, and thus, are efficient in the weak form. There are applied two widely used unit root tests (the augmented Dickey-Fuller - ADF - and Phillips-Perron - PP - tests), which do not take into account the nonlinearity in the series. The results of both tests indicate that Romanian stock price index series (as well as all the other stock markets but Russian and Chinese stock price index series) contain a unit root - a finding that supports the market efficiency in the weak form. Using the nonlinear unit root test of Kapetanos et al. (2003), the null hypothesis of a unit root for the Romanian stock price index (as well as for the Chinese, Polish, and Russian ones) is rejected, which

efficient capital markets and the quantity theory of …

explained by the estimated model (R= 0.07) and the influence of the non- systematic factor is significant. Based on these facts, they conclude that the long-term stock price dynamics are influenced, to a large extent, by the action of “some punctual, short term and non-general factors”. As a consequence, they cannot reject the weak form of the efficiency hypothesis taking into account the fact that even if the autoregressive process is stationary it has little influence on stock return.

money and the efficient capital markets hypothesis

In a study that encompasses a larger period (from mid-1997 to September 2002), Harrison and Paton (2004b) use a GARCH model on daily data of stock price index and model the disturbances to allow for “fat-tails”. They find that the lagged stock price index represents a significant predictor of the current stock price index and they interpret this fact as a strong evidence for the inefficiency of the BSE. However, the inefficiency level appears to decrease over time and evidence for the existence of market efficiency after January 2000 is identified.

markets hypothesis namely Efficient Capital ..

When a GARCH model is used, the coefficient on lagged returns of the model is positive and statistically significant (p-value = 0.005). Thus, future returns can be predicted with the help of past returns - a sign of market inefficiency. However, in the case of GARCH-t model - appropriate for the Romanian stock market because of the positive excess kurtosis of returns - the coefficient on lagged returns is smaller in absolute value and in significance (p-value = 0.062). Therefore, at a 5 % significance level, the market efficiency hypothesis is not rejected in the case of GARCH-t model, while the hypothesis is rejected in the case of the GARCH model. The tests for calendar effects, which were also implemented by adding to the models dummy variables, do not lead to evidence that supports the existence of these effects on the two capital markets.

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