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A multidimensional classification of market anomalies: Evidence from 76 price indices

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  • Doyle, John R.
  • Chen, Catherine Huirong

Abstract

This paper makes the first attempt to present explicit empirical evidence that market inefficiency can be multi-dimensional. Testing the Efficient Market Hypothesis (EMH) over 76 stock indices using 17 best established indicators (e.g. runs test), we show that most indices exhibit some type(s) of anomaly and that indicators differ from each other in terms of statistical power and/or the type of anomaly detected. A principal components analysis (PCA) demonstrates that indicators group along orthogonal dimensions, and hence a market can exhibit short-term memory, long-term memory and/or calendar effects, which are all distinct sources of possible inefficiency. This research presents statistical evidence on the extent and nature of market inefficiency, offers possible explanations for conflicting previous findings, and provides new insights into studying market efficiency.

Suggested Citation

  • Doyle, John R. & Chen, Catherine Huirong, 2012. "A multidimensional classification of market anomalies: Evidence from 76 price indices," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(5), pages 1237-1257.
  • Handle: RePEc:eee:intfin:v:22:y:2012:i:5:p:1237-1257
    DOI: 10.1016/j.intfin.2012.07.003
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    Cited by:

    1. Doyle, John R. & Chen, Catherine H., 2013. "Patterns in stock market movements tested as random number generators," European Journal of Operational Research, Elsevier, vol. 227(1), pages 122-132.
    2. Juan Benjamín Duarte Duarte & Juan Manuel Mascare?nas Pérez-Iñigo, 2014. "Comprobación de la eficiencia débil en los principales mercados financieros latinoamericanos," ESTUDIOS GERENCIALES, UNIVERSIDAD ICESI, November.

    More about this item

    Keywords

    Market efficiency; EMH; Stock indices; Statistical tests; Multi-dimensional;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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