Weak Form Efficiency Tests
Seminar paper from the year 2009 in the subject Business economics - Investment and Finance, grade: 2,3, University of Edinburgh, language: English, abstract: While using standard tests of weak form market efficiency along with the more recent DELAY test, this report examines if the returns of six selected stocks and two decile indices follow a random walk which would evidence the non-predictability of future stock returns by historical prices which is a necessary condition for the weakest form of market efficiency. The evidence of four different measurement tests suggests that except of one stock all stocks and indices drift away from the weak form market efficiency hypothesis.
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12 lags 2002 to December absolute values AC and PAC AC PAC AC Advanced Micro Devices AMD BDK EGN Autocorrelation and Partial BDK EGN CLHB Black&Decker Clean Harbors CLHB COBZ COKE CoBiz Financial COBZ COKE N/A/N Coca-Cola Coca-Cola Bottling COKE and N/A/N COKE N/A/N D1 Company Status D10 Lag AC daily and monthly daily data daily returns decile indices descriptive statistics efficient market hypothesis EGN CLHB COBZ Energen follow a random homoscedastic increments Jarque-Bera test Lag AC PAC lag order Log-Returns AMD BDK maximum returns monthly data monthly returns normal distribution null hypothesis NYSE/AMEX/NASDAQ Decile p-value PAC AC PAC PAC coefficients Panel partial autocorrelation period January 2002 random walk hypothesis Results for Daily runs test ſ ſ ſ S&P GICS serial correlation six selected stocks six stocks skewed squared log-returns statistical significance stock price stocks and indices unrestricted regression USA Sector variance ratio test volatility clustering weak form efficient