Testing Weak-Form Market Efficiency On The TSX

Abstract

<p>This study tests the validity of the weak-form EMH on the Canadian TSX equity market using seven TSX daily index returns. Quantitatively, a variety of statistical tests is used to test for the randomness of return series. Results of the common statistical (i.e., the autocorrelation, the BG, the runs) tests all suggest that returns are serially correlated, except returns on the TSX 60 capped index. After rejecting the RWM of TSX indices using univariate unit root (i.e., ADF, PP, KPSS), we proceed to test for the possibility of nonlinear dynamic patterns present in return series. BDS results reject an IID underlying residual series after fitting AR(2) to TSX daily index returns, indicating that a deterministic chaotic process describes the data well. This finding of a temporal dependency is supported also by results of the R/S analysis, which indicates that all TSX index returns possess long-memory properties of an anti-persistent trend-reversing behaviour with two indices showing stronger degree of anti-correlation and five indices showing weaker degree of anti-correlation. Overall, results uniformly reject the RWM governing TSX equity index returns, implying that the Canadian equity market is weak-form inefficient.</p>

Day-of-The-Week Anomaly on Different Stock Capitalization: Evidence from Indonesian Stock Market

“…Where: : return in period t, : natural logarithm, : close price of stocks or index in period t, −1 : close price of stocks or index in period t-1. Based on Shiller and Radikoko (2014), natural logarithm is utilized so that the return values are more likely to be distributed normally and to dismiss parts of linear dependency between the current and the past return.…”

Gelecek 11 Ülkeleri̇nde Dövi̇z Kuru Zayif Form Pi̇yasa Etki̇nli̇ği̇ni̇ Taki̇p Etmektedi̇r Mi̇? Kapsamli Bi̇ri̇m Kök Testleri̇ İle Kanitlar

“…The results indicated that the stationarity levels change depending on the regional and economic development levels. Shiller and Radikoko (2014) used parametric and non-parametric tests in addition to univariate unit root tests through daily profits of seven indexes in their study where they analysed the market efficiency in Canada Exchange market. Accordingly, the RWH was rejected and it was concluded that the market is not efficient in weak-form and market profits can be predictable.…”

An Empirical Analysis of Behaviour of Stock Market Indices

“…The present study has run the BDS test on filtered residuals series, which are extracted by running a second order autoregression (AR) Equation (2). The only motive behind running AR (2) is to remove the linear structure that exists in the return series in order to improve the validity of the results (Shiller & Radikoko, 2014). The hypotheses under the BDS test are:…”