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Paradoxes Of Modern Stock Exchange Markets

Author

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  • CIOBANU Gheorghe

    (Babeș - Bolyai University, Faculty of Economics and Business Administration, Cluj-Napoca, Romania,)

  • SECHEL Ioana Cristina

Abstract

In this article we propose an easy approach of stock exchanges and their impact on the real economy. The paradoxes of modern stock exchanges are commonly understood as opinions that contradict the generally accepted truth and therefore are considered absurdities or huge enormity by the majority of the population. The paradoxes are essentially based on logical arguments that sometimes can lead to contrary or contradictory conclusions (depends on the situation) of a truth already known and accepted. In connection with capital market, through this approach we try to highlight a few aspects that come out from everyday life, breaking the monotony of theoretical resolutions. We can associate anomalies in trading financial instruments with prove that financial markets are inefficient. They can be highlighted best on the developed financial markets. Through their specific, there are anomalies in a stock market that demonstrates either that the market is inefficient or that there are some discrepancies regarding certain asset price formation. If we talk about market inefficiency hypothesis, it is demonstrated that in that market, the efficiency of the market is not verified or partially verified. It has been shown that such anomalies tend to diminish or even disappear in time, thereby reducing or even eliminating the profit opportunities of the investors who speculate on them (Schwert, 2003, p 940). The stock exchange anomalies, especially those with a direct impact on the financial instruments price which are traded on stock exchanges, are likely to offer investors the opportunity to obtain above-average market gains, in term of a proper management. To assess whether or not the phenomenon can be considered as a stock market anomaly, it must be compared with a normal behavior or with a normal model. In addition to the main categories of stock market anomalies that we identified (calendar, technical or fundamental) a paradox of recent years in the investment in stock market is the high-frequency trading (HFT - high-frequency trading), this requires a ultra-fast trading of the securities, using special algorithms but also highly advanced technologies. The effects of very rapid extension of these practices are reaping huge profits in fractions of time increasing fraction of time here, and more than that the pronounced weakening of the link between the stock market and the real economy.

Suggested Citation

  • CIOBANU Gheorghe & SECHEL Ioana Cristina, 2013. "Paradoxes Of Modern Stock Exchange Markets," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 89-96, July.
    • Handle: RePEc:ora:journl:v:1:y:2013:i:1:p:89-96
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    File URL: http://anale.steconomiceuoradea.ro/volume/2013/n1/009.pdf
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    References listed on IDEAS

    as
    1. Schwert, G. William, 2003. "Anomalies and market efficiency," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 15, pages 939-974, Elsevier.
    2. repec:ejw:journl:v:1:y:2004:i:1:p:29-46 is not listed on IDEAS
    3. Josef Lakonishok, Seymour Smidt, 1988. "Are Seasonal Anomalies Real? A Ninety-Year Perspective," The Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 403-425.
    4. Sven Bouman & Ben Jacobsen, 2002. "The Halloween Indicator, "Sell in May and Go Away": Another Puzzle," American Economic Review, American Economic Association, vol. 92(5), pages 1618-1635, December.
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    Cited by:

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    2. Zain UI Abideen & Zeeshan Ahmed & Huan Qiu & Yiwei Zhao, 2023. "Do Behavioral Biases Affect Investors’ Investment Decision Making? Evidence from the Pakistani Equity Market," Risks, MDPI, vol. 11(6), pages 1-32, June.

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    Keywords

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    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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