Browsing by Subject "Efficient Market Hypothesis"

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Open Access
Performance analysis of single structural break test with an empirical study on efficient market hypothesis"
(2005) Yıldız, İzzet
In this thesis, performance of the single structural break tests is examined. Since it has proved superiority of Sequential F test on other single break tests, it is chosen as single break test. Monte Carlo simulation is run for different scenarios and performances of the test with respect to estimating break points, and parameters, and rejecting or accepting the joint null hypothesis is observed. For all cases small sample bias is observed. The test estimates parameters correctly for large samples but for small samples it underestimates or overestimates parameters. Another common problem is about joint null hypothesis. When test rejects the joint null, it doesn’t identify which of the joint hypothesis is rejected. Therefore in this study, we utilize the t-statistic of the parameters to determine the individual hypothesis rejected. In addition to these common problems we illustrate other scenario specific problems in this study. We examine the implications of our Monte Carlo findings by applying the break test to real life data and investigate the efficient market hypothesis using stock market data on SP&500. Application of the sequential F test shows evidence against the efficient market hypothesis.
Open Access
Testing for the success and the use of contrarian strategies in İstanbul Stock Exchange
(2003) Germeyanoğlu, Ümit Mehmet
This thesis analyses an anomaly, namely the Overreaction Hypothesis, which is a widely studied behavioural finance approach that has challenged the Efficient Market Hypothesis. The Overreaction Hypothesis states that extreme movements in the stocks prices will be followed by subsequent movements in the opposite direction; i.e. past losers significantly outperform past winners, which is a violation of the weak form efficiency. We examine the presence of such price correction and the success of contrarian strategies in İstanbul Stock Exchange (ISE) for the period of 1986 to 2001. We use a modified version of De Bondt and Thaler’s methodology to form winner, loser and arbitrage portfolios of one, two and three year formation / test periods. We find out that for all formation / test periods, there is a substantial price correction in the market, which supports the Overreaction Hypothesis and the profitability of contrarian strategies. Our evidence may indicate that ISE is not weak form efficient. Furthermore, we inspect the foreign investors’ behaviour and its effects in ISE. A significant relation between foreign investors purchase or sales decision and the return of the stocks is detected. It is also found that foreign investors behave rationally since they use contrarian strategies in ISE.