Date of Award
7-13-2021
Degree Type
Thesis
Degree Name
Master of Philosophy (MPHIL)
Discipline
Social Sciences
Department
Economics
First Advisor
Prof. VOON Jan Piaw Thomas
Second Advisor
Prof. HONG Fuhai
Abstract
The Covid-19 pandemic outbreak caused huge impact on global financial markets. This paper uses Hurst exponent as methodology to revisit the traditional concept of market efficiency including stock markets and cybercurrency markets which becomes increasingly popular these years like Bitcoin and Ethereum. The empirical tests are based on two following hypotheses: 1. The inefficiency level of cybercurrency markets will be higher than stock markets. 2. The inefficiency level of cybercurrency markets and stock markets will both go up after the pandemic outbreak.
The three sufficient conditions raised by Eugene F. Fama for market efficiency are: (i) there are no transactions costs in trading securities, (ii) all available information is costlessly available to all market participants, and (iii) all agree on the implications of current information for the current price and distributions of future prices of each security. However, for investments in real financial markets, interactions between investors could be complicated and all the three above conditions are often violated. To gain insights from practical investments in the markets, this paper will also provide a perspective on how investors may think about payoffs of the various assets based on conditional information! Given the personal available conditional information and valuation function of an investor, the rational investment choice of the investor will be on his estimated mean-variance-time line. This perspective offers pragmatic understanding of investments in real financial markets.
Language
English
Copyright
The copyright of this thesis is owned by its author. Any reproduction, adaptation, distribution or dissemination of this thesis without express authorization is strictly prohibited.
Recommended Citation
Peng, H. (2021). Practical perspective of market efficiency and comparison of empirical efficiency tests (Master's thesis, Lingnan University, Hong Kong). Retrieved from https://commons.ln.edu.hk/otd/139/