Advanced Search
MyIDEAS: Login

Efficient market hypothesis: is the Croatian stock market as (in)efficient as the U.S. market

Contents:

Author Info

  • Velimir Šonje

    (Arhivanalitika ; Zagreb School of Economics and Management, Zagreb)

  • Denis Alajbeg

    (Zagreb School of Economics and Management, Zagreb)

  • Zoran Bubas

    (Zagreb School of Economics and Management, Zagreb)

Registered author(s):

    Abstract

    Traditional statistical tests of serial independence of stock price changes often show that stock markets are inefficient. Our analysis on daily and monthly data confirms this finding for the Croatian and U.S. markets in the 2002-2010 period. However, this result seems to be mainly due to the impact of the crisis of 2008-2009. The observation of monthly data in the pre-crisis period suggests market efficiency in the U.S. and (rather surprisingly) in Croatia also. Daily data indicate a high degree of efficiency of the US stock market before the crisis, but it is impossible to conclude with a satisfying level of confidence that the Croatian market was inefficient in that period. Furthermore, an elementary moving average crossover trading system beats the CROBEX and S&P 500 indices from 1997 to 2010, indicating market inefficiency. Still, if the same trading rule is applied to the S&P 500 index in an extended time period between 1950 and 2010, the conclusion about market inefficiency becomes less convincing. It seems that (in)efficiency varies both across markets and in the same markets in the long run, but it still remains unknown which processes are the driving factors behind these changes.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.ijf.hr/upload/files/file/FTP/2011/3/sonje-alajbeg-bubas.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by Institute of Public Finance in its journal Financial Theory and Practice.

    Volume (Year): 35 (2011)
    Issue (Month): 3 ()
    Pages: 301-326

    as in new window
    Handle: RePEc:ipf:finteo:v:35:y:2011:i:3:p:301-326

    Contact details of provider:
    Postal: Smiciklasova 21, 10000 Zagreb
    Email:
    Web page: http://www.fintp.hr/
    More information through EDIRC

    Related research

    Keywords: efficient market hypothesis; capital markets; CROBEX; S&P 500;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-73, April.
    2. Brock, William A. & Hommes, Cars H. & Wagener, Florian O. O., 2005. "Evolutionary dynamics in markets with many trader types," Journal of Mathematical Economics, Elsevier, vol. 41(1-2), pages 7-42, February.
    3. Cajueiro, Daniel O. & Tabak, Benjamin M., 2006. "Testing for predictability in equity returns for European transition markets," Economic Systems, Elsevier, vol. 30(1), pages 56-78, March.
    4. Campbell R. Harvey, 1994. "Conditional Asset Allocation in Emerging Markets," NBER Working Papers 4623, National Bureau of Economic Research, Inc.
    5. S. G. M. Fifield & D. M. Power & D. G. S. Knipe, 2008. "The performance of moving average rules in emerging stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 18(19), pages 1515-1532.
    6. LeRoy, Stephen F, 1989. "Efficient Capital Markets and Martingales," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1583-1621, December.
    7. Brock, William & Lakonishok, Josef & LeBaron, Blake, 1992. " Simple Technical Trading Rules and the Stochastic Properties of Stock Returns," Journal of Finance, American Finance Association, vol. 47(5), pages 1731-64, December.
    8. Jean-François Nivet, 1997. "Stock markets in transition: the Warsaw experiment," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 5(1), pages 171-183, 05.
    9. LeRoy, Stephen F, 1973. "Risk Aversion and the Martingale Property of Stock Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 436-46, June.
    10. Mateus, Tiago, 2004. "The risk and predictability of equity returns of the EU accession countries," Emerging Markets Review, Elsevier, vol. 5(2), pages 241-266, June.
    11. Chun, Rodney M., 2000. "Compensation vouchers and equity markets: Evidence from Hungary," Journal of Banking & Finance, Elsevier, vol. 24(7), pages 1155-1178, July.
    12. James M. Poterba & Lawrence H. Summers, 1989. "Mean Reversion in Stock Prices: Evidence and Implications," NBER Working Papers 2343, National Bureau of Economic Research, Inc.
    13. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    14. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ipf:finteo:v:35:y:2011:i:3:p:301-326. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martina Fabris).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.