WEAK FORM OF MARKET EFFICIENCY - EUROPEAN CAPITAL MARKET

Regep Horatiu Dan
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Regep Horatiu Dan: FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION, WEST UNIVERSITY OF TIMISOARA, ROMANIA

Annals - Economy Series, 2015, vol. 4, 202-211

Abstract: One of the most important implications of different levels of market efficiency is associated to the usability and the results of applying various methods of information processing. More specifically, it can be argued that the use of technical analysis is conditioned by the degree of market efficiency in terms of accuracy of trading signals generated by specific indicators. If financial market has a high degree of efficiency then the indicators are not able to generate systematic higher results than the market average. Conversely, if the market efficiency is low investors using technical analysis tools are able to build and manage portfolios of financial assets where the return/ risk ratio is higher compared to other portfolios were investors do not use a systematic treatment of the available information. The objective of this work lies in the description of the potential influence of financial and non financial information might have on financial markets, thus influencing the use of technical analysis tools in building investment portfolios. Thus, we analyzed the market efficiency in week form (autocorrelation test, run test, variance ratio test) in emerging capital market from Eastern Europe (WIG) compared to developed capital markets in Western Europe (Euro Stoxx). In this paper we focused on a individual analysis of the company stocks from those indexes divided according to the sector in which the companies operate (Consumer goods; Goods, Industry, Energy; Financial; Telecommunication). The analysis is done on an hourly frequency.

Keywords: market efficiency; autocorrelation test; run test; variance ratio test; capital market (search for similar items in EconPapers)
Date: 2015
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