Analysis for Efficient Stock Index Market
Journal of Finance and Accounting
Volume 3, Issue 5, September 2015, Pages: 103-116
Received: Jul. 6, 2015; Accepted: Jul. 10, 2015; Published: Jul. 17, 2015
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Author
Byung Woo Kim, Division of Liberal Arts, Korea National University of Transportation(KNUT), ChungJu City, South Korea
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Abstract
According to efficient market hypothesis, all the available information about future spot prices is incorporated into KOSPI200 stock index future contract prices immediately. In this paper, we test the hypothesis by an econometric approach developed by Johansen (2001), etc. Using only past data, we can consider stock market as efficient. (Weak-form EMH) But, it should be noted that if using past index future contract data leads to conclusion that future market is not efficient, and then the news about spot market prices is not fully incorporated in the future market. These tests imply that unbiasedness hypothesis (constant is zero, and coefficient is one) is rejected in regression equation. Notwithstanding, the forecasting performance of the Distributed-lags model using future index was best among competing forecasting models. In summary, there is no significant evidence that stock index spot markets are inefficient. Through long-run equilibrium relationships (and short-run dynamics, error correction), almost all the information for spot index in the past has functioned as spot price discovery in Korea stock markets.
Keywords
Efficient Market, Nonstationarity, Price Discovery, Conditional ECM, Cointegration
To cite this article
Byung Woo Kim, Analysis for Efficient Stock Index Market, Journal of Finance and Accounting. Vol. 3, No. 5, 2015, pp. 103-116. doi: 10.11648/j.jfa.20150305.11
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