Testing the Semi-strong Form of Efficiency in Czech Stock Market
Testing the Semi-strong Form of Efficiency in Czech Stock Market

Author(s): Petr Seďa, Juan Antonio Jimber Del Río, María de los Baños García-Moreno García
Subject(s): Economic history, Transformation Period (1990 - 2010), Present Times (2010 - today), Financial Markets
Published by: Masarykova univerzita nakladatelství
Keywords: CAPM; Czech stock market; event study; semi-strong form of efficiency; statistical tests;
Summary/Abstract: The efficient market hypothesis represents possible analytical approach when analyzing behaviour of financial markets. The aim of this paper is to test the efficient market hypothesis in its semi-strong form using data from Czech stock market. Information efficiency of the Czech stock market is assessed in relation to seven announcement of Moody´s rating agency regarding changes of credit rating of Greek government bonds in the period of 2009-2012 years. For the purpose of this paper, the event study method is applied. The basic idea of this statistical method is to determine values of abnormal returns, which can be defined as a difference between actual and equilibrium returns. In order to calculate equilibrium returns the Capital Asset Pricing Model is used. Observed differences between actual and equilibrium returns were verified with a help of selected nonparametric statistical tests. Namely, the exact sign test and the Wilcoxon sign-ranked test were utilized. Based on results of statistical tests, the null hypothesis of efficiency was rejected.

• Details
• Contents