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Testing weak form efficiency on the Toronto Stock Exchange


Alexeev, V and Tapon, F, Testing weak form efficiency on the Toronto Stock Exchange, Journal of Empirical Finance, 18, (4) pp. 661-691. ISSN 0927-5398 (2011) [Refereed Article]

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DOI: doi:10.1016/j.jempfin.2011.05.002


In order to test for weak form efficiency in the market a vast pool of individual stocks must be analyzed rather than a stock market index. In this paper, a model-based bootstrap is used to generate a series of simulated trials and a modified chart pattern recognition algorithm is applied to all stocks listed on the Toronto Stock Exchange (TSX). The number of patterns detected in the original price series is compared with the number of patterns found in the simulated series. By simulating the price path specific time dependencies present in real data are eliminated, making price changes purely random. Patterns, if consistently identified, carry information which adds value to the investment process, however, this informativeness does not guarantee profitability. Conclusions are drawn on the relative efficiency of some sectors of the economy. Although the null hypothesis of weak form efficiency on the TSX cannot be rejected, some sectors of the Canadian economy appear to be less efficient than others. In addition, pattern frequencies appear to be negatively dependent on the two moments of return distributions, variance and kurtosis.

Item Details

Item Type:Refereed Article
Research Division:Economics
Research Group:Econometrics
Research Field:Econometrics not elsewhere classified
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Macroeconomics not elsewhere classified
UTAS Author:Alexeev, V (Dr Vitali Alexeev)
ID Code:73152
Year Published:2011
Web of Science® Times Cited:25
Deposited By:Economics and Finance
Deposited On:2011-09-15
Last Modified:2017-11-22
Downloads:1 View Download Statistics

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