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Testování slabé formy efektivnosti na českém akciovém trhu
[Testing the weak form of efficient market hypothesis for the czech stock market]

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  • Tran Van Quang

Abstract

Efficient Market Hypothesis has dominated the field of research on capital market theory. It postulates that asset prices are rationally connected to economic realities and always incorporate all the information available to the market. A huge quantity of theoretical works around the world have been devoted to testing this hypothesis. In this paper, the weak form of the Efficient Market Hypothesis is tested on data from the Czech stock market of period 1996-2006. The tested hypothesis is verified by both linear and nonlinear methods. Those linear are: Box-Pierce test, variance ratio test, test of sequences and reversals nad Hurst exponent. The nonlinear ones are: White test, Engle test, Hinich test and BDS test. These tests are carried on stock returns time series of Czech stock market index PX and individual stocks as Telefónica, Komerční banka and ČEZ and series with randomly changed order from original series. The results of the testing indicate that returns, when randomly permutated, are independent, hence they follow a random walk. But it is impossible to maintain it in case of original returns series.It implies that returns of either Czech stock market index or its stocks are not independent and do not follow a random walk.

Suggested Citation

  • Tran Van Quang, 2007. "Testování slabé formy efektivnosti na českém akciovém trhu [Testing the weak form of efficient market hypothesis for the czech stock market]," Politická ekonomie, Prague University of Economics and Business, vol. 2007(6), pages 751-772.
    • Handle: RePEc:prg:jnlpol:v:2007:y:2007:i:6:id:622:p:751-772
    DOI: 10.18267/j.polek.622
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    References listed on IDEAS

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    1. M. Hashem Pesaran, 2005. "Market Efficiency Today," IEPR Working Papers 05.41, Institute of Economic Policy Research (IEPR).
    2. Melvin J. Hinich, 1982. "Testing For Gaussianity And Linearity Of A Stationary Time Series," Journal of Time Series Analysis, Wiley Blackwell, vol. 3(3), pages 169-176, May.
    3. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    4. 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.
    5. Poterba, James M. & Summers, Lawrence H., 1988. "Mean reversion in stock prices : Evidence and Implications," Journal of Financial Economics, Elsevier, vol. 22(1), pages 27-59, October.
    6. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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    Citations

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    Cited by:

    1. Kristoufek, Ladislav, 2009. "Procesy s dlouhou pamětí a jejich vývoj ve výnosech indexu PX v letech 1999 – 2009 [Long-term memory and its evolution in returns of PX between 1999 and 2009]," MPRA Paper 16435, University Library of Munich, Germany.
    2. Robert G. Kuklik, 2012. "The Macroeconomic Effects of Information Asymmetry in the Capital Markets," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2012(1), pages 62-73.

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    More about this item

    Keywords

    random walk; Efficient Market Hypothesis; Hypothesis Testing; Linear and Nonlinear Methods; Czech Stock Market; Time Series with Randomly Permutated Order;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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