Testing the Weak Form of Efficiency in Moscow Exchange
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Abstract
The existence of weak-form price efficiency at the Moscow Exchange was examined for the period from the 3rd of January, 2005, till the 10th of January, 2019 with reference to daily, weekly and monthly time-series of returns for the Moscow Exchange stock index (MOEX). Parametric test approaches, namely, the ADF Unit Root Test and the autocorrelation test, as well as non-parametric tests, namely, the PP Unit Root test, the Runs test and the BDS Non-linear independence test, were applied to test the weak-form efficiency hypothesis for the Moscow Exchange stock index. The test results provide sufficient evidence to reject the weak-form efficiency hypothesis for the Moscow Exchange. The ADF and PP tests showed that the daily, weekly and monthly return variability is stationary. The BDS test reveals the presence of a non-linear correlation within daily, weekly and monthly stock index returns at the Moscow Exchange, which suggests irrational patterns of investment behavior from many investors in this market. The Runs test indicates that the investors are underestimating returns at the Moscow Exchange when new information arrives on the market. This study suggests that using technical and fundamental analyses would lead participants to profitable trading rules
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