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Finance and Credit
 

Assessing the Russian financial market efficiency by a non-parametric method

Vol. 20, Iss. 48, DECEMBER 2014

Available online: 18 December 2014

Subject Heading: Financial market

JEL Classification: 

Pages: 14-24

Darushin I.A. St.Petersburg State University, St. Petersburg, Russian Federation
darushin@mail.ru

L'vova N.A. St.Petersburg State University, St. Petersburg, Russian Federation
lvova_n .a@mail.ru

Importance The paper addresses the theory and practice of financial market efficiency evaluation. The efficient market hypothesis, which has been strongly criticized recently, remains one of the basic financial conceptions. However, there are no common approaches to evaluating efficiency. Besides, the methodology of evaluating efficiency of emerging markets has been studied insufficiently, and this fact determined the purpose of the investigation.
     Objectives The article deals with some topical questions concerning weak-form efficiency of the Russian financial market. The hypotheses of the study included: firstly, testing normality of stock returns; secondly, evaluating if the returns follow the random walk model.
     Methods We carried out the hypotheses testing on the sample of 20 stocks of the largest Russian companies listed on the Moscow Stock Exchange, and by the RTS index. We chose the sector RTS-Standard to ensure comparability of the statistical data, since its rules did not change during the period of the study. The analyzed period was 4 years and 5 months. We applied the skewness and kurtosis analyses to test the yield distribution. In addition, we performed a number of formal tests by the criteria of Kolmogorov-Smirnov, Lilliefors and Shapiro-Wilk. We substantiated the evaluation methodology with the application of the nonparametric method taking into account the yield distribution. We chose the runs-test as a tool of the analysis.
     Results The assumption of normal distribution of stock returns was not confirmed. However, we proved that stock returns on the Russian market do not correspond to the random walk process.
     Conclusions and Relevance Despite the financial crisis, the Russian stock market has preserved a weak form of informational efficiency. This should be taken into account in the investment analysis and corporate financial diagnostics.

Keywords: emerging, financial, market, efficiency, informational, weak-form

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