You are required to test a market price for weak form efficiency
1.Select the market price
2.construct a schedule of tests
3.complete the proforma and email it to me
4.obtain the data
5.carry out the tests
6.write up the results
7.Submit! See submission date below
Data sources: EIU, oanda.com, yahoo finance, datastream
The write up(8 pages): please follow this format!
Section 1. Introduction – What is being tested/reviewed? Why is the test/review important?
Section 2. Test design: How are you going to carry out your tests be absolutely crystal clear in this section.
Section3. Test: Results and further tests.
Section4 Reflections on results and suggestions for further tests.
Pro forma (1 page): please complete these sections and submit to me (see item 3 above)
2.Significance for Finance
3.How will you test your question?
4.What will your test establish?
5.Data required for the Test
6.Source of Data
METHODS OF TESTING FOR WEAK FORM EFFICIENCY
Runs tests – MINITAB
A run is the number of changes in the same direction, so +++–++++ has three runs.
The test counts the number of runs above and below the mean and compares the results with what one would expect from a random distribution. If the P score is close to 1 then there is a high probability that the actual runs are the same as the expected runs from a random process if the P score is below 0.05 then it is significantly different and not random.
Variance ratio test
The ratio of the longer period variance with the shorter period variance multiplied by the number of shorter time periods in the longer period ie one would expect that the monthly variance is the weekly variance x 4. You may look at days to years, months to years, weeks to months and so on. You may choose one long period or see if the variance changes over time by dividing the period into smaller time periods and so on. And of course you may choose any time series of financial data, a currency, a share price or market index – any market price that you would expect to conform to a random process.
Nested if instructions
You can use Excel to answer questions such as: if there are three rises in a row what is the probability that the share price or exchange rate will increase on the fourth day. The instruction for this is: =IF(B4B3,IF(B3B2,IFB2B1,B5,),),). But you can see that this enables you to choose any pattern albeit quite strictly defined. B% in this example
Data sources should be founded from EIU, oanda.com, yahoo finance or datastream.
Assignment must conform to table below.
Please make sure that you can answer YES to the following
I have placed my appendices and references at the end of this project. The appendices just contain backup data with brief explanations. Yes/No**
The LECTURE NOTES, support material and textbooks (Pilbeam, K plus the Bain, K. and Howells, P.) have been my main source of reference. Yes/No**
Any sequence of more than FOUR (4) words from another source has been referenced using the Harvard system FOR EXAMPLE words from another source (Keynes V. B., 2005). You MUST use inverted commas (.) for words that are NOT your own.Yes/No**
My similarity score is below 10%Yes/No**
ALL the material for my project is contained in my Word file submission. I understand that NO other source will be markedYes/No**
Data from Excel and other sources have been cut and pasted into my Word file submission as appropriate (EITHER through direct copy and paste OR the printscreen key (PrtScn) and then cropped to the relevant area). Large databases have been shortened by giving the first 10 and last 10 entries.Yes/No**
ALL tables, graphs etc have in the bottom left hand corner source: for example Source: ESDS and own analysis Yes/No**
I have constructed ALL the tables and graphs in my submissionYes/No**
I have followed the write up format given in the “Assessment + Project Notes section of the Blackboard siteYes/No**
My data includes the latest data availableYes/No**
The reading list:
Authors: Pilbeam, Keith, 1961-
Title: Finance & financial markets
Publisher: Basingstoke : Palgrave Macmillan
Authors: Howells, P. G. A., 1947-.Bain, K., 1942-
Title: Financial markets and institutions
Publisher: Harlow : Financial Times Prentice Hall
Authors: Dobbins, Richard.Witt, Stephen F.Fielding, John
Title: Portfolio theory and investment management
Publisher: Oxford : Blackwell