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Adaptive Markets Hypothesis - Evidence from Asia-Pacific Financial Markets

Author

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  • Alexandru Todea

    (Academia de Studii Economice / Facultatea de Finante, Asigurari, Banci si Burse de Valori)

  • Maria Ulici

    (Academia de Studii Economice / Facultatea de Finante, Asigurari, Banci si Burse de Valori)

  • Simona Silaghi

    (Academia de Studii Economice / Facultatea de Finante, Asigurari, Banci si Burse de Valori)

Abstract

In this paper we investigate the profitability of the moving average strategy on six Asian capital markets considering the episodic character of linear and/or nonlinear dependencies, the period under study being 1997-2008. For each market, the most profitable strategy from 15000 alternatives is selected. The main conclusion is that profitability of moving average strategies is not constant in time; it is episodic showing when sub-periods of linear and non-linear correlation appear. Thus, one can thus say that the degree of market efficiency varies through time in a cyclical fashion over time and these statistical features are in line with those postulated by Adaptive Markets Hypothesis (AMH) of Lo (2004, 2005).

Suggested Citation

  • Alexandru Todea & Maria Ulici & Simona Silaghi, 2009. "Adaptive Markets Hypothesis - Evidence from Asia-Pacific Financial Markets," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 1(1), pages 007-013, December.
  • Handle: RePEc:rfb:journl:v:01:y:2009:i:1:p:007-013
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    References listed on IDEAS

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    1. Alexandru Todea, 2008. "Episodic dependencies and the profitability of moving average strategy on Romanian capital market," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 11(11(528)(s), pages 186-193, November.
    2. Ratner, Mitchell & Leal, Ricardo P. C., 1999. "Tests of technical trading strategies in the emerging equity markets of Latin America and Asia," Journal of Banking & Finance, Elsevier, vol. 23(12), pages 1887-1905, December.
    3. Lim, Kian-Ping & Brooks, Robert D. & Hinich, Melvin J., 2008. "Nonlinear serial dependence and the weak-form efficiency of Asian emerging stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(5), pages 527-544, December.
    4. Claudio Bonilla & Rafael Romero-Meza & Melvin Hinich, 2006. "Episodic nonlinearity in Latin American stock market indices," Applied Economics Letters, Taylor & Francis Journals, vol. 13(3), pages 195-199.
    5. Bessembinder, Hendrik & Chan, Kalok, 1995. "The profitability of technical trading rules in the Asian stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 3(2-3), pages 257-284, July.
    6. Lagoarde-Segot, Thomas & Lucey, Brian M., 2008. "Efficiency in emerging markets--Evidence from the MENA region," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(1), pages 94-105, February.
    7. Lim, Kian-Ping & Brooks, Robert D. & Kim, Jae H., 2008. "Financial crisis and stock market efficiency: Empirical evidence from Asian countries," International Review of Financial Analysis, Elsevier, vol. 17(3), pages 571-591, June.
    8. repec:ebl:ecbull:v:7:y:2005:i:1:p:1-6 is not listed on IDEAS
    9. Alexandru Todea & Adrian Zoicas-Ienciu, 2008. "Episodic dependencies in Central and Eastern Europe stock markets," Applied Economics Letters, Taylor & Francis Journals, vol. 15(14), pages 1123-1126.
    10. 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 1731-1764, December.
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    Cited by:

    1. repec:eee:intfin:v:51:y:2017:i:c:p:190-208 is not listed on IDEAS
    2. Jasman Tuyon & Zamri Ahmada, 2016. "Behavioural finance perspectives on Malaysian stock market efficiency," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 16(1), pages 43-61, March.
    3. Mirzaee Ghazani, Majid & Khalili Araghi, Mansour, 2014. "Evaluation of the adaptive market hypothesis as an evolutionary perspective on market efficiency: Evidence from the Tehran stock exchange," Research in International Business and Finance, Elsevier, vol. 32(C), pages 50-59.
    4. Urquhart, Andrew & Hudson, Robert, 2013. "Efficient or adaptive markets? Evidence from major stock markets using very long run historic data," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 130-142.
    5. repec:eee:phsmap:v:486:y:2017:i:c:p:397-407 is not listed on IDEAS
    6. Elena Valentina Tilica, 2014. "The Month-of-the-Year Effect in Post-Communist East European Stock Markets," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 6(1), pages 029-040, June.
    7. H. -L. Shi & W. -X. Zhou, 2017. "Wax and wane of the cross-sectional momentum and contrarian effects: Evidence from the Chinese stock markets," Papers 1707.05552, arXiv.org.
    8. Verheyden, Tim & De Moor, Lieven & Van den Bossche, Filip, 2015. "Towards a new framework on efficient markets," Research in International Business and Finance, Elsevier, vol. 34(C), pages 294-308.
    9. Urquhart, Andrew & McGroarty, Frank, 2016. "Are stock markets really efficient? Evidence of the adaptive market hypothesis," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 39-49.

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    Keywords

    Profitability market; strategy; efficiency;

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