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Limits to the Efficiency of the Capital Market
Vyhlídka, Jan ; Pošta, Vít (advisor) ; Lopušník, Ondřej (referee)
The aim of this study is to gather insights into market efficiency and mechanisms that work in the financial markets. It provides a framework with an emphasis on liquidity and the failure of arbitrage that deepens our understanding of various financial crises. Described mechanisms are particularly relevant for the last financial crises - including 2007-2009, LTCM, and dot-com bubble. In the first chapter the concept of efficient markets is introduced. In the second chapter it is challenged from the point of view of noise trader theory and limits of arbitrage. The third chapter deals with market microstructure and liquidity. Last chapter shows importance and adverse effects of externalities, particularly of those causing liquidity spirals.
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The Monday effect and The January effect on selected stock markets
Skřiváček, Petr ; Veselá, Jitka (advisor)
This bachelor thesis is focused on the efficient market hypothesis and selected anomalies on capital markets. The first part deals with the efficient market hypothesis, the second and the third part contains testing of the monday effect and the january effect on selected stock markets. The goal of my thesis is to describe the efficient market hypothesis, test the monday effect on selected stock indexes and the january effect on selected stocks and index of Prague stock exchange.
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Linear relation in stock time series
Nemčíková, Lucia ; Bašta, Milan (advisor) ; Helman, Karel (referee)
The aim of this Bachelor's Thesis is to verify the hypothesis of absence of linear relations between logarithmic returns in the stock time series, determined from the efficient markets hypothesis and the existence of linear relations between the squares of returns. I used regression analysis and conditional heteroskedasticity ARCH test of linear type, to achieve the results. My own analysis proved that even if there is a linear relation between logarithmic returns, the relation is not significant. On the other hand the linear relation between squares of returns is significant with tendency to be strong, what is a necessary condition for the use of a linear model of volatility.
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Czech koruna spot rate prediction based on the forward rate analysis
Karch, Jozef ; Mandel, Martin (advisor) ; Brůna, Karel (referee)
This bachelor thesis deals with the possibility of forecasting the future spot rate with forward rate. Based on theoretical assumptions, the theory of rational expectations and the efficient markets hypothesis, we will develop econometric models to test accuracy of such prediction based on a set of historical data of spot and forward rates. The analysis shows that the forward rate is not a satisfactory predictor of future spot rate.
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Underpricing and the Long-Run Underperformance of IPOs
Pindroch, Michal ; Musílek, Petr (advisor) ; Witzany, Jiří (referee)
When companies go public, the shares they sell tend to be underpriced, and thus exhibit a significant price jump on the first day of trading. As a result, IPO investors materialize significant first-day returns. In the long-run, however, relative to some benchmark, investors appear to lose out by continuing to hold the stocks of firms that have recently gone public. These IPO phenomena are subject of the following study. The thesis addresses two main objectives. First, it systematically surveys relevant empirical evidence and theories that have been proposed to explain IPO underpricing and long-run underperformance. In addition, both anomalies are studied form the viewpoints of two competing finance theories: efficient market hypothesis and behavioral finance. Theories of underpricing are grouped within two broad categories: asymmetric information based models and behavioral theories. While asymmetric information based models assume that one of the IPO transaction parties knows more than others, and that these information frictions give rise to underpricing, behavioral explanations, on the other hand, assume the presence of irrational investors who are the prime cause of underpricing. Theories of poor long-term performance are based on behavioral finance perspective only, where "investor sentiment" plays the main role. On the contrary, proponents of market efficiency strongly argue that the notion of systematic IPOs long-run underperformance is spurious. Secondly, the thesis empirically examines the presence of underpricing and the long-performance of IPOs in European NYSE Euronext markets. In general, the results undoubtedly show that IPOs in the sample are moderately underpriced on average. However, the assessment of IPOs long-run performance provides contentious findings and probably requires further research.
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Testing of weak-form efficiency of the exchange market
Havel, Radek ; Veselá, Jitka (advisor) ; Kalivoda, František (referee)
The goal of my thesis is to verify the weak form of the efficiency of the exchange market. The paper results from the presumptions for efficient price movements on the financial markets. They are applied to the time series of exchange rates of five currency pairs. After definitions of testing methodology, the given exchange rates series are analysed with the help of correlation and autocorrelation test, runs test and a test based on technical analysis. The conclusion of the thesis anwers the question if the exchange rates movements are suitable with the efficient market hypothesis.
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