Adaptive Market Hypothesis and Predictability: Evidence in Latin American Stock Indices
| Title: | Adaptive Market Hypothesis and Predictability: Evidence in Latin American Stock Indices |
|---|---|
| Authors: | Andrés R. Cruz-Hernández, Andrés Mora-Valencia |
| Source: | Latin American Research Review, Vol 59, Pp 292-314 (2024) |
| Publisher Information: | Cambridge University Press, 2024. |
| Publication Year: | 2024 |
| Collection: | LCC:Latin America. Spanish America LCC:Social Sciences |
| Subject Terms: | Adaptive market hypothesis, efficient market hypothesis, stock return predictability, Latin America markets, Hipótesis del mercado adaptativo, hipótesis del mercado eficiente, predictibilidad del rendimiento de las acciones, mercados de América Latina, Latin America. Spanish America, F1201-3799, Social Sciences |
| More Details: | This article examines the adaptive market hypothesis in the five most important Latin American stock indices. To that end, we apply three versions of the variance ratio test, as well as the Brock-Dechert-Scheinkman test for nonlinear predictability. Additionally, we perform the Dominguez-Lobato and generalized spectral tests to evaluate the Martingale difference hypothesis. Moreover, we consider salient news related to the plausible market inefficiencies detected by these four tests. Finally, we apply a GARCH-M model to assess the risk-return relationship through time. Our results suggest that the predictability of stock returns varies over time. Furthermore, the efficiency in each market behaves differently over time. All in all, the analyzed emerging market indices satisfy the adaptive market hypothesis, given the switching behavior between periods of efficiencies and inefficiencies, since the adaptive market hypothesis suggests that market efficiency and market anomalies might coexist in capital markets. |
| Document Type: | article |
| File Description: | electronic resource |
| Language: | English Spanish; Castilian Portuguese |
| ISSN: | 1542-4278 |
| Relation: | https://www.cambridge.org/core/product/identifier/S1542427823000317/type/journal_article; https://doaj.org/toc/1542-4278 |
| DOI: | 10.1017/lar.2023.31 |
| Access URL: | https://doaj.org/article/44e5f78118f14a2798da3575304956eb |
| Accession Number: | edsdoj.44e5f78118f14a2798da3575304956eb |
| Database: | Directory of Open Access Journals |
| ISSN: | 15424278 |
|---|---|
| DOI: | 10.1017/lar.2023.31 |
| Published in: | Latin American Research Review |
| Language: | English Spanish; Castilian Portuguese |