Exploring price gap anomaly in the Ukrainian stock market

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This paper analyzes price gaps in the Ukrainian stock market for the case of UX index over the period 2009–2018. Using different statistical tests (Student’s t-tests, ANOVA, Mann-Whitney test) and regression analysis with dummy variables, as well as modified cumulative approach and trading simulation, the authors test a number of hypotheses searching for price patterns and abnormal market behavior related to price gaps: there is seasonality in price gaps (H1); price gaps generate statistical anomalies in the Ukrainian stock market (H2); upward gaps generate price patterns in the Ukrainian stock market (H3) and downward gaps generate price patterns in the Ukrainian stock market (H4). Overall results are consistent with the Efficient Market Hypothesis: there is no seasonality in price gaps and in most cases there is no evidences of price patterns or abnormal price behavior after the gaps in the Ukrainian stock market. Nevertheless, the authors find very strong and convincing evidences in favor of momentum effect on the days of negative gaps. These observations are confirmed by trading simulations: trading strategy based on detected price pattern generates profits and demonstrates overall efficiency, which is against the market efficiency. These results can be interesting both for academicians (further evidences against market efficiency) and practitioners (real and effective trading strategy to generate profits in the Ukrainian market market).

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    • Figure 1. Day of the week and gaps in the Ukrainian stock market
    • Table 1. Descriptive statistics for data, UX index over the period from 2009 to 2019
    • Table 2. Price patterns in the Ukrainian stock market before and after gaps
    • Table 3. Fill the gap effect in the Ukrainian stock market
    • Table 4. Overall results for the Ukrainian stock market: case of H3 and H4
    • Table 5. Efficiency of the trading strategy based on price gap anomaly: the case of the Ukrainian stock market over the period 2009–2018
    • Table 6. Z-test of the trading strategy based on price gap anomaly: the case of the Ukrainian stock market over the period 2009–2018
    • Table A1. Average analysis, the case of the UX index over the period 2009–2018
    • Table A2. T-test, the case of the UX index over the period 2009–2018
    • Table A3. ANOVA, the case of the UX index over the period 2009–2018
    • Table A4. Mann-Whitney test, the case of the UX index over the period 2009–2018
    • Table A5. Regression analysis with dummy variables, the case of the UX index over the period 2009–2018
    • Table A6. Modified CAR approach, the case of the UX index over the period 2009–2018