Market efficiency, based on people acting rationally, has been the dominating finance theory for most of the 20th and 21st Century’s. This classical finance theory is based on assumptions that people are rational, they absorb all available information and maximise utility. This view is outdated; it has been shown that people are in fact irrational and that this could be the cause of anomalies in the market. Behavioural finance takes into account people, and their natural biases. Behavioural finance has integrated classical financial theories and psychological theories to illustrate the way in which irrational people can impact market efficiency. This research looks at the way collective investment scheme manager decision-making can impact market efficiency. Specifically the behavioural biases: overconfidence, over optimism, loss aversion and frame dependence and whether or not collective investment scheme performance is affected by these. This research was carried out using a questionnaire distributed directly to CIS managers and risk-adjusted returns were used in order to allow for comparative results. The results from the questionnaire show evidence that actively managing South African CIS managers do indeed suffer from overconfidence and loss aversion and they do not appear to suffer from frame dependence or over optimism in this research context. There was also evidence showing that managers who suffer from these biases also demonstrated lower investment returns. “The investor’s chief problem, and even his worst enemy, is likely to be himself.” - Benjamin Graham

The purpose of the study is to empirically determine the relevance of PPP theory under the traditional arbitrage and the efficient markets (EPPP) frameworks during the recent floating period of the 1980s. Monthly data was collected for fifteen industrial nations from January 1980 to December 1986. The models tested included the short-run PPP, the long-run PPP, the EPPP, the EPPP with deviations from expectations, the forward rates as unbiased estimators of future spot rates, the EPPP and the forward rates, and the EPPP with forward rates and lagged values. A generalized regression method called Seemingly Unrelated Regression (SUR) was employed to test the models. The results support the efficient markets approach to PPP but fail to support the traditional PPP in both the short term and the long term. Moreover, the forward rates are poor and biased predictors of the future spot rates. The random walk hypothesis is generally supported.

01 Abstract Betting on sporting events can be perceived by the general public as a game of chance. In the professional literature, however, betting on football matches is treated in the same way as other financial markets, where in the event of a violation of the theory of efficient markets due to the occurrence of inefficiency, there are opportunities for investors to obtain abnormal returns. The main goal of this work is to create a model capable of predicting the results of football matches on the basis of historical data better than bookmakers are able to do and test the effectiveness of the Czech betting market for football matches of the Czech highest football league. The first part of the thesis contains a more detailed presentation of the theory of efficient markets, a comparison of financial and betting markets and sources of possible inefficiency in betting markets. The second and third parts present data, models and their possible modification to increase the accuracy of estimates. The fourth part describes the results of testing individual models and subsequent simulations of betting strategies. The fifth part contains a conclusion and discussion of the results, including an indication of possible alternatives to follow-up research. The results of simulations of betting strategies confirm...

This thesis investigates the price discovery process between the stock and the credit default swap market (CDS). We link the financial theory of efficient markets and the underlying models and conditions involved in CDSs, the stock market and financial crashes. This study uses publicly listed firms and the European market CDS series to construct a matched stock portfolio and uses financial data collected between the years 2019 to 2021. The purpose is to better understand the price discovery process during a potential new type of crisis in modern financial history. It could potentially allow portfolio managers, traders, arbitrageurs and stakeholders who monitor systematic indices to gauge the level of risk in the overall economy. It can also better inform regulators about how the CDS and the stock market reacted to each other during the COVID-19 pandemic. This deductive and quantitative research is based on secondary data gathered from the Eikon financial database. It uses a vector autoregressive model to test a hypothesis regarding the price discovery process between the stock and CDS portfolios.  Our results show that when using only the variables for the CDS and stock market, both variables cause each other, which is to say a feedback effect is present between the CDS Europe index and the matched portfolio of stocks. When adding the three control variables, the stock variable no longer causes the CDS variable, while the CDS variable still causes the stock variable. We conclude that the European credit default swap index leads the matched portfolio of stocks in the price discovery process with our chosen variables.

This study addresses the empirical question of heterogeneous market efficiency characteristics, specifically as they are attributable to divergent levels of professional securities analyst attention. As a significant group of information intermediaries, analyst institutions conceivably influence, in a profound manner, the efficiency with which security prices respond to new information. Consistent with this notion is the hypothesis that the securities of firms which are neglected in terms of analyst coverage exhibit price inefficiencies relative to their closely followed counterparts. Two market efficiency constructs with respect to annual earnings announcements are examined in this study. Preannouncement information efficiency is guaged by the degree to which security prices appear to lead or anticipate the information content of subsequent public earnings releases. Such price behavior is indicative of the market's ability to acquire and, process interim, signals that are relevant to the determination of proper and timely security valuations. Postannouncement, or semi-strong-form, efficiency is in turn referenced by the relative absence of anomalous "drifting" patterns in postdisclosure returns. The presence of significant drifts is inconsistent with a market that adjusts quickly and unbiasedly to signals that are transmitted publicly. Sample firms taken from the NYSE are ranked into three groups according to their relative following by the professional securities analyst community. Analyst attention is surrogated by the number of investment houses providing annual earnings per share forecasts for companies listed in the Institutional Brokers Estimate System (IBES) computer file. The delineation of the three attention concentration groups' relative efficiency profiles is accomplished by means of two uniquely derived metrics that restate cumulative abnormal returns (CAR's) into an ordered domain of pre- and postannouncement efficiency structures. The CAR's are derived from dailly price data immediately surrounding annual earnings announcement dates for the calendar years ended 1976 through 1982. Owing to the nonnormal distributional properties of the inefficiency metrics, two nonparametric procedures are employed to detect group mean differences. The results overwhelmingly indicate that both pre- and postannouncement efficiency are positively associated with professional analyst attention. Moreover, the detected efficiency differences cannot be attributed to firm size effects or to the extent of the market's forecast error -- two factors that have previously been established in the empirical literature to be associated with event period CAR magnitudes. / Ph. D.

published_or_final_version / Architecture / Master / Master of Philosophy

In the first part of thesis, we investigated the influence and explanatory power of aggregate insider trading activities on momentum trading strategies in US stock markets. We find that aggregate insider trading activities have ability in predicting cross-sectional returns and can strengthen the naive momentum effects. The risk factors such as size and book-to-market ratio cannot explain the strong momentum effects in our refined momentum strategies. We further extend the time horizon to as long as 3 years and find that the reversal patterns. We interpret our findings as follows: The continuous overreaction causes the mediate term (3- to 12 months) momentum effects and overly pricing. In long-term horizon, these overly priced stocks will be corrected with the time passing. The correction of overly pricing causes long-term reversals. / In the second part of the thesis, we studied relationships between the efficiency of external market and the capital allocation processes in internal market by investigating the performance of red chips traded in Hong Kong. Because of its special role between China and international capital market, it is difficult for international investors to monitor how red chips allocated their Hong Kong raised capital in China. The evidences show that red chips made poor investments in the past decades. However, the external market failed to reflect the unprofitable investment made by the management groups in the internal market. At least, our evidences show that the red chips made diversified but unprofitable investments in aggregate level in the past decade. / Jihong Xiang. / "December 2001." / Source: Dissertation Abstracts International, Volume: 63-01, Section: A, page: 0306. / Supervisors: Jia He; Duan Li. / Thesis (Ph.D.)--Chinese University of Hong Kong, 2001. / Includes bibliographical references (p.102-113). / Available also through the Internet via ProQuest dissertations and theses under title: Are markets efficient? Evidences from stock markets in United States of America and Hong Kong. / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest dissertations and theses, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest Information and Learning Company, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Abstracts in English and Chinese. / School code: 1307.

by Lee Yui. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1997. / Includes bibliographical references (leaves 70-72). / ACKNOWLEDGMENT --- p.i / ABSTRACT --- p.ii / LIST OF TABLES --- p.iii / LIST OF FIGURES --- p.iv / Chapter CHAPTER 1: --- INTRODUCTION --- p.1 / Chapter CHAPTER 2: --- BACKGROUND INFORMATION --- p.7 / Chapter 2.1 --- Stock Trading in Hong Kong --- p.7 / Chapter 2.1.1 --- History and Recent Trend --- p.8 / Chapter 2.1.2 --- Trading Mechanism of the Stock Exchange of Hong Kong --- p.11 / Chapter 2.1.3 --- Short Sale Restrictions --- p.12 / Chapter 2.1.4 --- Hang Seng Index --- p.14 / Chapter 2.2 --- Hang Seng Index Futures --- p.17 / Chapter 2.2.1 --- History and Recent Trend --- p.18 / Chapter 2.2.2 --- Trading and Settling Methods --- p.22 / Chapter CHAPTER 3: --- LITERATURE REVIEW --- p.24 / Chapter 3.1 --- Studies of Futures Market Efficiency based on Daily Data --- p.24 / Chapter 3.2 --- Studies of Futures Market Efficiency based on Intraday Data --- p.28 / Chapter CHAPTER 4: --- METHODOLOGY --- p.34 / Chapter 4.1 --- Index Futures Efficiency and Arbitrage Profitability --- p.34 / Chapter 4.2 --- Structure of Efficiency Tests --- p.36 / Chapter 4.2.1 --- Test based on Minute by Minute Reported Index --- p.36 / Chapter 4.2.2 --- Ex Post Test based on Transaction Prices of the Constitutent Stocks --- p.37 / Chapter 4.2.3 --- Ex Ante Test --- p.38 / Chapter 4.3 --- An Example for Illustration --- p.39 / Chapter 4.3.1 --- Results of the Efficiency Test based on Reported Index Quotations --- p.40 / Chapter 4.3.2 --- Results of the Ex Post Test based on Transaction Prices --- p.41 / Chapter 4.3.3 --- Results of Ex Ante Test --- p.42 / Chapter 4.4 --- Transaction Costs --- p.43 / Chapter CHAPTER 5: --- DATA AND PRELIMINARY STATISTICS --- p.46 / Chapter 5.1 --- Data from the Stock Market --- p.46 / Chapter 5.2 --- Data from the Futures Market and Money Market --- p.48 / Chapter CHAPTER 6: --- EMPIRICAL RESULTS --- p.49 / Chapter 6.1 --- Frequency of Ex Post Mispricings of Futures Prices --- p.49 / Chapter 6.2 --- Profitability of Hang Seng Index Arbitrage --- p.52 / Chapter 6.2.1 --- Results of Ex Ante Test with an Execution Lag of 30 Seconds --- p.52 / Chapter 6.2.2 --- Results of Ex Ante Test with an Execution Lag longer than 30 Seconds --- p.54 / Chapter 6.3 --- Comparison of Long Arbitrage Profitability and Short Arbitrage Profitability --- p.57 / Chapter 6.3.1 --- Comparison of Ex Post Violations between Long Arbitrage and Short Arbitrage --- p.58 / Chapter 6.3.2 --- Comparison of Ex Ante Profitability between Long Arbitrage and Short Arbitrage --- p.59 / Chapter CHAPTER 7: --- CONCLUSIONS --- p.65 / BIBLIOGRAPHY --- p.70

Thesis (Ph. D.)--University of Missouri-Columbia, 2002. / Typescript. Vita. Includes bibliographical references (leaves 92-95). Also available on the Internet.

Thesis (Ph. D.)--University of Missouri-Columbia, 2002. / Typescript. Vita. Includes bibliographical references (leaves 92-95). Also available on the Internet.