A new hypothesis, The Adaptive Markets Hypothesis (AMH), is applied to the Swedish stockmarket context by testing the variability of the risk-return trade-off over different investment horizons and market environments. Yearly returns and volatility are measured on OMXS30 index between1986 and 2017 over a variety of different investment horizons. Through the sample observations, a number of distinct market environments become apparent. A regression analysis is then used to test the statistical significance of the risk-return relationship. The results show a weak – and varying – statistical relationship between risk and return, implying that risk is not a reliable explanatory variable for average returns. The length of the investment horizon and the market environment the investment is being made in are shown to be influential factors on changes to the risk-return relationship. These findings from the OMXS30 index support the AMH, showing that the risk-return relationship is dynamic and subject to changes over different investment horizons and in different market environments.

The purpose of this investigation was to test the theoretical possibility of an investor earning a positive cash return from the activities of the stock market despite effectively holding no position at all in said market. The sample data were the daily returns for the shares of the 780 companies listed on the NASDAQ and the New York Stock Exchange (“NYSE”), which fell within the top 500 listed companies by market capitalisation between 1 January 2005 and 31 December 2017. The reversal strategy’s performance was evaluated using portfolios constructed as quantiles of 100 or 500 shares, respectively, where the investor had the option of implementing the reversal strategy immediately after an information-gathering period closed or a day thereafter. The time intervals used were 1 January 2005 to 29 September 2008 (the day the Dow Jones Industrial Average crashed by 777.68 points), 29 September 2008 to 31 December 2017 and 1 January 2005 to 31 December 2017. Of the 1000 portfolios tested in each time interval, at least 416 had positive average returns in every time interval. Of the portfolios that had positive average returns over the time intervals, at least 66 had statistically significant average returns in every time interval. The best-performing portfolio for the entire sample period was a combination of the best-performing pre-crash and post-crash portfolios - an investor who held that portfolio realised a cumulative return of approximately $61.39 for every $1 invested. The conclusion was that it was theoretically possible for an investor to earn a positive cash return from the market’s activities despite effectively holding no position at all in the market. Consequently, it was concluded that the strong form of Fama’s (1970) Efficient Market Hypothesis was disproved. Future research should include out-of-sample tests, tests that include restrictions on short selling and tests that consider the impact of trading costs on portfolio performance, to render the conclusions of this investigation more practically applicable to investors.

Made available in DSpace on 2010-04-20T20:08:16Z (GMT). No. of bitstreams: 0 Previous issue date: 1990-06-28T00:00:00Z / The nuclear part of this doctoral dissertation is a research work, which investigates the trade-off between accounting risk and return in 10 Brazilian economic sectors. For the 1978-87 period, in a sample of 344 firms, a negative risk/return association was detected in eight sectors and a positive or neutral one in only two sectors. Pooling together data for the 344 firms, a negative relationship between risk and return was found. After splitting the sample according to firm profitability, an essentially negative risk/return association was identified in the less profitable half of the firms studied, both within and across sectors. On the other hand, the more profitable firms in the sample exhibited a lack of significant association between accounting risk and return, within and across sectors. / Na pesquisa, que é a parte nuclear desta tese, investiga-se a relação entre risco e retorno contábeis em 10 setores econômicos brasileiros. No período 1978-87, com amostra de 344 empresas, detectou-se associação risco/retorno negativa em oito setores e positiva ou neutra em apenas dois. No todo da amostra, sem divisões setoriais, também se encontrou relação negativa entre risco e retorno. Dividindo as firmas entre mais e menos rentáveis, achou-se uma associação risco/retorno essencialmente negativa na metade das empresas menos lucrativas e ausência de associação entre as duas variáveis na metade das firmas mais lucrativas, tanto dentro dos setores como para toda a amostra.