Testing the adaptive market hypothesis and its determinants for the Indian stock markets

Hiremath, Gourishankar S.; Narayan, Seema

doi:10.1016/j.frl.2016.07.009

Cited by 66 publications

(34 citation statements)

References 12 publications

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“…Thus, to address shortcomings of EMH, Lo (2004) proposed AMH, which explains evolving nature of market efficiency. To investigate evolving efficiency, past studies adopted their sample in two different ways: (a) studies arbitrarily divide their full sample to subsamples (see Borges, 2011) and (b) studies use fixed-length rolling window sample (see Charles et al, 2011Charles et al, , 2012Hiremath & Narayan, 2016;Singh & Chakraborty, 2017). Studies that followed the arbitrary division of full sample to subsamples have been criticized because of their limitation to discrete change at a prefixed point of time.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Since development of AMH, its practical importance holds the attention of researchers across financial markets in the recent past (Hiremath & Narayan, 2016;Khuntia & Pattanayak, 2018;Singh & Chakraborty, 2017). Specifically, in the context of FX market, Neely et al (2009) in 10 developed FX markets, Charles et al (2012) in five developed FX markets and Katusiime et al (2015) in Uganda FX market investigated AMH and were of the view that market efficiency varies with time as per the proposition of AMH.…”

Section: Literature Reviewmentioning

confidence: 99%

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Evolving Efficiency of Exchange Rate Movement: An Evidence from Indian Foreign Exchange Market

Khuntia

Pattanayak

2019

Global Business Review

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This study empirically verifies the evolving and time-varying efficiency of Indian foreign exchange market using the framework of adaptive market hypothesis (AMH). Whether market efficiency is time varying or static, and if time varying, identification of possible events causing such time-varying efficiency are the two major agenda of this study. We employ a set of recent methods which are robust and possess stronger power properties. Moreover, we follow a fixed-length rolling window approach to explore time-varying nature of market efficiency and to avoid data-snooping bias. Our overall findings suggest that market efficiency is not an all-or-nothing condition; it varies over time. We also find that episodes of efficiency coincide with emergence of major events and market microstructure issues. Particularly, changes in exchange rate regime, financial turbulence, major central bank interventions and trade volume are the prominent causes for time-varying efficiency in INR–USD exchange rate. The evidence of swing between efficiency and inefficiency can prompt currency traders to exploit arbitrage opportunities that emerge with different market conditions.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Evolving Efficiency of Exchange Rate Movement: An Evidence from Indian Foreign Exchange Market

Khuntia

Pattanayak

2019

Global Business Review

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“…Lo (2005) argues that convergence to equilibrium is neither guaranteed nor likely to occur and that it is incorrect to assume that the market must move towards some ideal state of efficiency. The AMH has gained quite a lot of attention in the recent literature such as Kim, Shamsuddin, and Lim (2011), Urquhart and Hudson (2013), Urquhart and McGroarty (2014), and Hiremath and Narayan (2016). 2 Since the original paper by Gatev et al (2006), the literature has expanded, but the issue of cross-border pairs trading is not well developed.…”

Section: Introductionmentioning

confidence: 99%

Pairs trading across Mainland China and Hong Kong stock markets

Zhang

Urquhart

2018

Int. J Fin Econ

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Motivated by the rationale that market inefficiency arises from a combination of less than fully rational demand and limits to arbitrage, this paper investigates the profitability of pairs trading across Mainland China and Hong Kong on highly liquid large‐cap and midcap stocks from January 1996 to July 2017. We have three main findings. First, we find that pairs trading constrained within each market generates no significant abnormal returns. However, if investors can trade across Mainland China and Hong Kong, pairs trading is profitable after adjusting for risk and transaction costs, where the annualized abnormal return is 9% over the full sample. Second, by using a rolling‐window regression, we find that the profitability of the strategy is time‐varying. The bootstrap simulations suggest that the decline in profitability of the strategy since 2012 is due to random chance rather than poor ability of identifying mispriced stocks. However, the vast majority of profitable periods reflect the strategy's ability to choose profitable stocks rather than random chance. Third, the profitability of the strategy is somewhat sensitive to market conditions, most notably, the strategy is more profitable during longer term market turbulence. Overall, our empirical findings are consistent with the Adaptive Market Hypothesis in that the integration of financial markets and market conditions determine the level of market efficiency.

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“…Nadarajah và Chu cho rằng thị trường Bitcoin có tính hiệu quả yếu khi nghiên cứu dạng phương trình bậc cao hơn của giá Bitcoin 11 . Tuy nhiên, một thị trường không phải lúc nào cũng phân rõ là hiệu quả hay không hiệu quả mà tính hiệu quả sẽ thay đổi theo thời gian 37,38 . Sự ra đời của lý thuyết thích ứng của thị trường cho thấy tính hiệu quả của thị trường Bitcoin thay đổi qua thời gian và ngày càng trở nên hiệu quả hơn 12,39,40 .…”

Section: Cơ Sở Lý Thuyếtunclassified

Does Bitcoin share the same characteristics as a financial asset? Empirical evidence through the monetary policy

Thư

Dương

2020

Sci. Tech. Dev. J. Econ. Law. Manag.

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The cryptocurrency market, especially Bitcoin, has been received much attention from investors in the market. They often pay attention to which factors determine Bitcoin prices in order to make an investment decision more correctly. Therefore, the research focuses on the determinants of Bitcoin prices in the market based on previous studies relevant to stocks. In addition, to control variables including stock prices, gold prices, and exchange rates, the study also emphasizes on the monetary policy of the two great countries considered to have a strong influence on the volatility of the cryptocurrency market, the US and China. Data in the research are collected from reliable sources (coinmarketcap.com for Bitcoin data and Euromonitor for data on interest rates of the monetary policy). The study collects daily data for Bitcoin prices and monthly data for macroeconomic variables in the period of 2010 – 2018. With regard to the time series data, the research applies two econometric methods, GARCH and EGARCH, to evaluate the difference between positive and negative shocks of the monetary policy towards Bitcoin prices. The results indicate that interest rates of the Chinese and American monetary policy have a converse relationship with Bitcoin prices. Besides, control variables show a statistically significant association with Bitcoin prices. In conclusion, the research suggests that Bitcoin has the characteristics of a financial asset based on its similarities over determinants between stocks and Bitcoin.

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Testing the adaptive market hypothesis and its determinants for the Indian stock markets

Cited by 66 publications

References 12 publications

Evolving Efficiency of Exchange Rate Movement: An Evidence from Indian Foreign Exchange Market

Evolving Efficiency of Exchange Rate Movement: An Evidence from Indian Foreign Exchange Market

Pairs trading across Mainland China and Hong Kong stock markets

Does Bitcoin share the same characteristics as a financial asset? Empirical evidence through the monetary policy

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