Assessing market efficiency in Palestine Securities Exchange (PSE) market at weak form: Analysis from 2010–2022

Efficient market hypothesis (EMH) states that financial markets are “informationally efficient”, implying that current prices fully reflect all available information. The present study aims at testing the weak form of market efficiency of the individual stocks listed on the Bahrain Bourse for the period 2011 to 2015. Weak form of EMH is tested using the Kolmogorov-Smirnov goodness of fit test, run test and autocorrelation test. The K-S test result concludes that in general the stock price movement does not follow random walk. The results of the runs test reveals that share prices of seven companies do not follow random walk. Autocorrelation tests reveal that share prices exhibit low to moderate correlation varying from negative to positive values. As the study shows mixed results, it is difficult to conclude the weak form of efficiency of Bahrain Bourse.

This study begins with the assumption that the existence of abnormal circumstances will force investors to take measures to protect their investments in the capital market. Recently, the stock index in the Indonesian market has been declining and continued to fall until the end of April 2020 due to the impact of the Covid-19 pandemic. In terms of efficient market theory, prospect theory and signaling theory, this study aims to analyze the relationship between risk and return in the Indonesian capital market during the Covid-19 pandemic as a manifestation of investor behavior. To test hypotheses, the correlation test, the independent sample t-test and the Cohen test for 629 public firms with 52,836 observable data are used. The findings show that for financial sectors and non-financial sectors, the fourth period differs from previous periods when the relationship between systematic risk and stock returns is positive, although only non-financial sectors have a significant effect. The results show that efficient market theory, prospect theory and signaling theory are consistent with the phenomena around the Covid-19 pandemic in Indonesia. In addition, Cohen’s test results suggest that government policies in the face of the pandemic are successful in stimulating the market.

This study analyzed capital market investors’ recognition of the predictability of fair value-based valuation. It was examined if market investors overvalue the predictive value of fair value by comparing that value with that measured in accounting performance. The results reveal that investors are likely to overvalue fair value more than predictive values reflected in accounting performance. In particular, the results show that investors can gain abnormal returns through the market anomaly due to the functional fixation that investors cannot distinguish between unrealized profits and realized ones. Though there are considerable studies about accrual anomaly, few studies explore it with the separation of unrealized profits from total accruals. A number of studies about the causes of accrual anomaly have been conducted from various perspectives. The analysis of this study argues that the unrealized profits derived from fair value evaluation can be a cause of accrual anomaly. On the basis of the result, this study suggests that information about unrealized earnings should be reported separately.