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Is the Swedish stock market efficient?: Testing the weak form of efficient market hypothesis
Jönköping University, Jönköping International Business School, JIBS, Accounting and Finance.
Jönköping University, Jönköping International Business School, JIBS, Accounting and Finance.
2012 (English)Independent thesis Advanced level (degree of Master (One Year)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

This paper examines the efficiency of the Swedish stock market, by testing if it is possible to create an excess return by the use of technical trading rules. According to the efficient market hypothesis and the random walk theory, in an efficient market it is not possible to predict the future stock prices by analyzing historical stock prices. The profitability of tech-nical analysis and technical trading rules has been researched and debated extensively, but economists have yet to reach a consensus. Because of this we find it useful to continue to study technical trading rules, and in our case we will focus exclusively on the Swedish stock market. We have done this by applying the trading technique moving average on the Swe-dish stock exchange. We have used the OMX Stockholm 30 Index, OMXS30, the 30 most traded stocks on the Stockholm stock exchange. From Nasdaq OMX we have obtained the daily closing prices from 1986-09-30 - 2012-01-27. Our test shows support for technical trading rules. The best performing moving average is the (1,50,0), which substantially beats the buy-and-hold strategy while being statistically confident to 99%. We have also tested our data set for a unit root, if a unit root exists it implies that the data set is following a random walk. We cannot reject that there is a unit root with α = 0.10 in our data set, alt-hough it would be rejected with α = 0.11. Our result forces us to reject that the Swedish stock market is efficient which is consistent with previous research made one the Swedish stock market.

Place, publisher, year, edition, pages
Keyword [en]
Efficient market, Swedish stock market, OMXS30
National Category
Business Administration
URN: urn:nbn:se:hj:diva-18342OAI: diva2:531743
Subject / course
IHH, Business Administration
Social and Behavioural Science, Law
Available from: 2012-09-11 Created: 2012-06-07 Last updated: 2012-09-11Bibliographically approved

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