Adaptive market hypothesis and intraday dynamics: High-frequency evidence from the Casablanca Stock Exchange

Pairs trading that is built on ’Relative-Value Arbitrage Rule’ is a popular short-term speculation strategy enabling traders to make profits from temporary mispricing of close substitutes. This paper aims at investigating the profit potentials of pairs trading in a new finance area – on cryptocurrencies market. The empirical design builds upon four well-known approaches to implement pairs trading, namely: correlation analysis, distance approach, stochastic return differential approach, and cointegration analysis, that use monthly closing prices of leading cryptocoins over the period January 1, 2018, – December 31, 2019. Additionally, the paper executes a simulation exercise that compares long-short strategy with long-only portfolio strategy in terms of payoffs and risks. The study finds an inverse relationship between the correlation coefficient and distance between different pairs of cryptocurrencies, which is a prerequisite to determine the potentially market-neutral profits through pairs trading. In addition, pairs trading simulations produce quite substantive evidence on the continuing profitability of pairs trading. In other words, long-short portfolio strategies, producing positive cumulative returns in most subsample periods, consistently outperform conservative long-only portfolio strategies in the cryptocurrency market. The profitability of pairs trading thus adds empirical challenge to the market efficiency of the cryptocurrency market. However, other aspects like spectral correlations and implied volatility might also be significant in determining the profit potentials of pairs trading.

This research explores the influence of foreign ownership on non-financial public shareholding firms in the Amman Stock Exchange (ASE). The study involved an investigation into the connection between non-Jordanian ownership and the company growth opportunity, stock liquidity, leverage, dividend policy and business output. The results highlight that foreign ownership can provide improved corporate governance practices by playing a decisive role in increasing the growth opportunity and enhancing the firms’ market valuation, as measured by Tobin’s Q. Moreover, the findings indicate that companies with foreign board membership have better operating performance and higher firm value. The rewards were reaped by foreign investors based on their superior monitoring ability, which affects the decisions made and actions taken by management.

The study identifies the features of the USD/UAH exchange rate dynamics for the period from January 2014 to May 2020. The main purpose of the empirical analysis is to determine the current trend of the USD/UAH exchange rate (is it random or permanent), indicate the presence of seasonality in foreign exchange rate dynamics and evaluate its sensitivity to external shocks. Three hypotheses are tested using several methods of time series analysis (autocorrelation analysis, ADF, Phillips-Perron and Granger tests), including a trend-season model using a time series of one variable (ARMA), a multifactor VAR-model, impulse functions. The results show that, the movement of the hryvnia exchange rate against the US dollar is a stochastic process. Its trend has a random component and tends to change sharply over time. Moreover, exchange rate fluctuations are seasonal. It depreciates in the first and second quarters, and strengthens in the third and fourth. Some macroeconomic indicators cause a positive or negative reaction of the USD/UAH exchange rate. This indicates that today the Ukrainian foreign exchange market is relatively efficient, but stable, since its reaction to external shocks is short-term, insignificant and tends to fade out. Although the findings are controversial, they support the generally accepted view that the exchange rate formation is a multifactorial process that depends on several macroeconomic factors. However, high volatility and random walk specification indicate that it is almost impossible to predict its future value at this time.

Acknowledgment
The material was prepared within the framework of the scientific research Modeling and Forecasting the Behavior of Financial Markets as an Information Base for Ensuring Financial Stability and Security of the State, No. 0117U003936 (supervisor Alex Plastun).