Home  Journals  Financial Analytics: Science and Experience  21(255) - 2015 June

Methods for testing the efficiency of the financial market

Vol. 8, Iss. 21, JUNE 2015

Article PDF Version

Available online: 14 June 2015

Subject Heading: MATHEMATICAL ANALYSIS AND MODELING IN ECONOMICS

JEL Classification: 

Pages: 58-68

Importance The article analyzes and classifies mathematical methods that national and foreign economists use to evaluate the efficiency of the lending market and securities market. The research is relevant since the Russian economists express absolutely opposite views on the efficiency of the Russian stock market. Furthermore, various testing methods applied considerably influence an evaluation, which, in its turn, impacts investment decisions.
     Objectives The article aims at aligning numerous methods for analyzing the quality of the financial market by their ability to test market efficiency forms as adequately as possible.
     Methods The proposed classification is of hierarchical and multicriteria nature. The mathematical methods were grouped on the basis of the hypothesis of that there are three levels of the financial market efficiency, and their traditional division to technical and fundamental analysis.
     Results Upon completion of analytical procedures, I grouped the methods for testing the quality of the lending market and securities market in line with selected classification criteria. I also identified the most reliable mathematical procedures to perform such studies.
     Conclusions and Relevance Following the research, I conclude that the classification and ranking of mathematical methods for studying economic entities and phenomena are the main objectives of economic analysis. When identical classes of computational procedures are identified, it is possible to avoid calculations giving one and the same results, save time for studying, make a deliberate choice of methods pertaining to different hierarchical levels. The results of the research may prove useful for improving the quality of financial market efficiency tests.

Keywords: efficiency, stock market, lending market, testing, information effectiveness, classification, efficiency method

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