Adaptive market hypothesis: The story of the stock markets and COVID-19 pandemic |
| |
Affiliation: | 1. Wang Yanan Institute for Studies in Economics (WISE), Xiamen University, 422 South Siming Road, Xiamen 361005, China;2. School of Management, China Institute for Studies in Energy Policy, Collaborative Innovation Center for Energy Economics and Energy Policy, Xiamen University, Fujian 361005, China |
| |
Abstract: | Since the level of markets’ information efficiency is key to profiteering by strategic players, Shocks; such as the COVID-19 pandemic, can play a role in the nature of markets’ information efficiency. The martingale difference and conditional heteroscedasticity tests are used to evaluate the Adaptive form of market efficiency for four (4) major stock market indexes in the top four affected economies during the COVID-19 pandemic (USA, Brazil, India, and Russia). Generally, based on the martingale difference spectral test, there is no evidence of a substantial change in the levels of market efficiency for the US and Brazilian stock markets in the short, medium, and long term. However, in the long term, the Indian stock markets became more information inefficient after the coronavirus outbreak while the Russian stock markets become more information efficient. Intuitively, these affect the forecastability and predictability of these markets’ prices and/or returns. Thereby, informing the strategic and trading actions of stock investors (including arbitrageurs) towards profit optimization, portfolio asset selection, portfolio asset adjustment, etc. Similar policy implications are further discussed. |
| |
Keywords: | Martingale Heteroscedasticity Market efficiency hypothesis Hypothesis testing COVID-19 pandemic |
本文献已被 ScienceDirect 等数据库收录! |
|