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Testing the adaptive market hypothesis as an evolutionary perspective on market efficiency: Evidence from the crude oil prices

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  • Ghazani, Majid Mirzaee
  • Ebrahimi, Seyed Babak

Abstract

This paper examines the existence of the adaptive market hypothesis (AMH) as an evolutionary alternative to the efficient market hypothesis (EMH) by applying daily returns on the three benchmark crude oils. The data coverage of daily returns is from 2003 to 2018. The automatic portmanteau and generalized spectral tests is applied in this study. The results show that the Brent and the WTI oil markets possess the highest efficiency levels. In addition, the behavior of OPEC basket data represents that when we approaching toward longer window lengths (e.g. from 100 to 500-days); the degree of conformity with AMH decreases.

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  • Ghazani, Majid Mirzaee & Ebrahimi, Seyed Babak, 2019. "Testing the adaptive market hypothesis as an evolutionary perspective on market efficiency: Evidence from the crude oil prices," Finance Research Letters, Elsevier, vol. 30(C), pages 60-68.
    • Handle: RePEc:eee:finlet:v:30:y:2019:i:c:p:60-68
    DOI: 10.1016/j.frl.2019.03.032
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    Cited by:

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    10. Pınar Evrim Mandacı & F. Dilvin Taskın & Zeliha Can Ergun, 2019. "Adaptive Market Hypothesis," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 84-101.
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    13. Muhammad Naeem Shahid, 2022. "COVID-19 and adaptive behavior of returns: evidence from commodity markets," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-15, December.
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    16. Shao Ying-Hui & Liu Ying-Lin & Yang Yan-Hong, 2022. "The short-term effect of COVID-19 pandemic on China's crude oil futures market: A study based on multifractal analysis," Papers 2204.05199, arXiv.org.
    17. Okorie, David Iheke & Lin, Boqiang, 2021. "Adaptive market hypothesis: The story of the stock markets and COVID-19 pandemic," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
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    19. Tiwari, Aviral Kumar & Abakah, Emmanuel Joel Aikins & Mefteh-Wali, Salma & Owusu, Patrick, 2023. "Measuring price efficiency in petroleum markets: New insights using various long-range dependence techniques," Resources Policy, Elsevier, vol. 82(C).

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    More about this item

    Keywords

    Evolutionary; Adaptive market hypothesis; Weak-form efficiency; Crude oil prices;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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