Testing Strong Form Market Efficiency of Jordanian Capital Market: Performance Appraisal of Mutual Funds a comparable study case with Saudi Arabia
DOI:
https://doi.org/10.18096/TMP.2020.02.01Keywords:
Efficient market hypothesis, Amman Stock Exchange, Jensen modelling technique, Strong-form efficiency, Abnormal Rate of ReturnAbstract
This paper analyses the strong-form efficiency of the capital market in Jordan by evaluating the performance of mutual funds over the period from 2011 to 2016, and compare it with the situation in Saudi Arabia using the Jensen modelling techniques. These tests were applied on monthly data. Results from the study show that there is no evidence of the strong-form of efficiency in either the Amman Stock Exchange or in the Saudi Arabia capital market. Therefore, investors in the Amman Stock Exchange and Saudi Arabia capital market cannot predict stocks prices or returns in the short term; with regard to firms, it suggests that the securities of firms cannot outperform the market and present market price is to a certain extent a true reflection of the present situation of their securities, in addition there is lack number availability of the mutual funds in Jordan.
References
ADMATI, A. R., & ROSS, S. A. (1985). Measuring investment performance in a rational expectations model. Journal of Business 58, 1-26. https://doi.org/10.1086/296280
ALBERT, A.S. (1985). Continuous Auctions and Insider Trading. Econometrica, 53, (6), 1315-1336. https://doi.org/10.2307/1913210
ASE. (2019). Retrieved from ASE., from Amman Stock Exchange: https://www.ase.com.jo/ar/bulletins/daily/new. daily sectors bulletin, Retrieved December 12, 2018, 16:20
BARNES, M., & MA, S. 2002, The behavior of China’s stock prices in response to the proposal and approval of bonus issues, Working paper, Federal Reserve Bank of New York. Available at SSRN: https://ssrn.com/abstract=458541 or http://dx.doi.org/10.2139/ssrn.458541
BETZER, A., & THEISSEN, Е. (2009). Insider Trading and Corporate Governance: The Case of Germany. European Financial Management, 15(2), 402-429. https://doi.org/10.1111/j.1468-036x.2007.00422.x
BUSTANJI, M. (2019). Testing semi strong form efficiency in Amman stock exchange. MultiScience - XXXIII. MicroCAD International Multidisciplinary Scientific Conference, University of Miskolc, 23-24 May, 2019 https://doi.org/10.26649/musci.2019.098
CAO, HENRY H. & ; MA, Y. (1999). Trade Disclosure and Imperfect Competition among Insiders. 53p. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.203.5337&rep=rep1&type=pdf
CHAU, M., & VAYANOS, D. (2008). Strong-Form Efficiency with Monopolistic Insiders. The Review of Financial Studies 21(5), 2275-2306. https://doi.org/10.1093/rfs/hhl029
FAMA, E. F., FISHER, L., JENSEN, M. C., & ROLL, R. (1969). The adjustment of stock prices to new information. . International Economic Review, 10(1), 1-21. https://doi.org/10.2307/2525569
FAMA, E. F., AND J. MACBETH. (1973). Return and Equilibrium: Empirical Tests. Journal of Political Economy 81(3). https://doi.org/10.1086/260061
FAMA, E. F., (1970) Efficient Capital Markets: A Review of Theory and Empirical Work, The Journal of Finance, 25(2), 383-417. https://doi.org/10.2307/2325486 https://doi.org/10.1111/j.1540-6261.1970.tb00518.x
FAMA, E. F., (1991) Efficient capital markets: II, The Journal of Finance 46, 1575-1617. https://doi.org/10.1111/j.1540-6261.1991.tb04636.x
FINNERTY, J., (1976). Insiders and Market Efficiency. The Journal of Finance, 31(4), 1141-1148. https://doi.org/10.1111/j.1540-6261.1976.tb01965.x
GLASS, G. A. (1966). Extensive Insider Accumulation as an Indicator of Near-Term Stock Price Performance. Unpublished Ph.D. dissertation Ohio State University, USA.
GRINBLATT, M, AND S. TITMAN. (1989). A comparison of measures of mutual fund performance on a sample of monthly mutual fund returns. Journal of Business 62, 383-416. https://doi.org/10.1086/296468
HBTF. (2019, 11 19). Summary of Mutual Funds . Retrieved from Jordanian Housing bank: https://www.hbtf.com/en/hbtf-mutual-fund-(new)
JAFFE, J. F. (1974b). The Effect of Regulation Changes on Insider Trading. Bell Journal of Economics and Management Science, 5 (1), 93-121. https://doi.org/10.2307/3003094
JAFFE, J. F. (1974a). Special Information and Insider Trading. The Journal of Business, 47(3), 410-420. https://doi.org/10.1086/295655
JENSEN, M.C. (1968). The performance of mutual funds in the period 1945-1964. Journal of Finance 23, 389-416. https://doi.org/10.1111/j.1540-6261.1968.tb00815.x
JENSEN, M. C. (1969). Risk, the pricing of capital assets, and the evaluation of investment protfolios. Hournal of Business 42, 176-247. https://doi.org/10.1086/295182
JENSEN, M. C. (1972). Optimal utilization of market forecasts and the evaluation of investment portfolio performance, G. P. Szego and K. Shell eds. (eds.) Mathematical Methods in Investment and Finance. Amsterdam North Holland. publishing Co. https://doi.org/10.2139/ssrn.350426
JSC. (2018a). JSC. Retrieved December 12, 2018, from Jordan Securities Commission: https://jsc.gov.jo/
JSC. (2019). November 17th Disclosures for listed companies . Jordan Securities Commision. Amman, Jordan.
JSC. (2019b). JSC. Retrieved December 12, 2018, from Commission, Jordan Securities Commision: https://jsc.gov.jo/
KHAN, A.Q. & SANA, I. M. (2010). Testing Semi-Strong Form of Efficient Market Hypothesis in Relation to the Impact of Foreign Institutional Investors’ (FII’s) Investments on Indian Capital Market. International Journal of Trade, Economics and Finance, 1(4), 373-379. https://doi.org/10.7763/ijtef.2010.v1.66
KHOTARI, S. P., & WARNER, J. B. (2009). Econometrics of Event Studies. Studies. In: Espen Eckbo, B. (ed.), Handbook of Empirical Corporate Finance, 1. (pp. 3-36). Elsevier https://doi.org/10.1016/B978-0-444-53265-7.50015-9
LEKOVIC, M. (2018). Evidence for and against the validity of efficient market hypothesis. Economic Themes, 56(3), 369-387. https://doi.org/10.2478/ethemes-2018-0022
LSC. (2018). Commission home page. Retrieved December 12, 2018, from Retrieved from Lithuanian Securities, Law on securities market, No. I-1169. http://www.lsc.lt/
MUBASHER. (2019, 11 19). Mubasher online. Retrieved from Mubasher arabic Mutual fund: https://www.mubasher.info/countries/jo/funds
POTOCKI T., Świst T. (2012), Empirical Test of Strong Form Efficiency of the Warsaw Stock Exchange: The Analysis of WIG20 Index Shares, South-Eastern Europe Journal of Economics, 2, 155–172.
PRATT, S. P., & De Vere, C.W. (1978). Relationship Between Insider Trading and Rates of Return for NYSE Common Stocks, 1960-66. Modern Developments in Investment Management: A Book of Readings. - Hinsdale, Ill. : Dryden. - 1978, p. 259-270
ROGOFF, D.L. (1964). The Forecasting Properties of Insiders' Transaction. Doctoral dissertation, Michigan State University. https://doi.org/10.1111/j.1540-6261.1964.tb02901.x
ROLL, R. (1977). A critique of the asset pricing theory's tests, Part I: On past and potential testability of the theory. Journal of Financial Economics 4, 129-176. https://doi.org/10.1016/0304-405x(77)90009-5
SEYHUN, H. N. (1986). Insiders Profits, Costs of Trading, and Market Efficiency. Journal of Financial Economics, 16, 189-212. https://doi.org/10.1016/0304-405x(86)90060-7
SHANNON, P. P., VERE , D., & CHARLES , W. (1978). Relationship Between Insider Trading and Rates of Return for NYSE Common Stocks, 1960-66. Modern Developments in Investment Management: A Book of Readings. - Hinsdale, Ill. : Dryden, ISBN 0030407168. - 1978, p. 259-270
SHAPIRO, S., & WILK, M. (1965). An analysis of variance test for normality (complete samples). Biometrika. 52, (3/4), 591-611. https://doi.org/10.1093/biomet/52.3-4.591
WONG, E. (2002). Investigation of Market Efficiency: An Event Study of Insider Trading in the Stock Exchange of Hong Kong. Retrived 2 November 2020, from https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.586.933&rep=rep1&type=pdf
Downloads
Published
How to Cite
Issue
Section
