Testing for Semi-Strong Efficiency in the Czech Stock Market
Efficient market hypothesis is one of the basic analytic approaches that try to explain movements of securities quotations in time. The basic idea of the efficient market theory is determination of prices of shares by interaction of interested rational market agents. Information efficiency therefore depends on fact, how market prices reflect all accessible relevant information. Semi-strongly form of efficient market hypothesis says that market prices of shares include all publicly accessible information. So effort to obtain and analyse publicly information therefore do not bring any results for analytics. If there is a semi-strongly form of efficiency, neither technical nor fundamental analysis help us to achieve above-average returns, because they are based on analyses of publicly accessible information, which are long before included in share prices. We will investigate the efficiency of the Czech equity market in point of view of reaction of market on development of economic data. We are seeking therefore answer to a question, if Czech equity market reacts to new economic information and how efficient its reaction is. The object of this paper is therefore testing of long-time relationships between selected indices of Czech equity market and selected economic variable using proper econometric methods. In the concrete we used Granger causality tests and cointegration analysis of time series. (fragment of text)
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