Testing Efficiency of the Latvian Stock Market: An Evolutionary Perspective

21 Pages Posted: 11 Mar 2002

See all articles by Timur Mihailov

Timur Mihailov

Independent

Dirk Linowski

University of Nijmegen, Nijmegen School of Management

Date Written: February 20, 2002

Abstract

Due to the recent foundation of the Latvian stock market, sufficient analysis of its efficiency has not yet been performed. Moreover, Latvia's supposed entrance in the European Union and the Euro zone in the following decade makes this research particularly interesting. The present paper reviews the paradigm of technical analysis as an alternative to the weak-form Efficient Market Hypothesis from an evolutionary perspective. It is shown that in the light of investors' bounded rationality technical analysis may have a valid theoretical framework. A test of the Latvian stock market weak-form efficiency by means of technical trading simulation is performed. Using Genetic Algorithms a problem of subjective selection and interpretation of technical indicator parameters is partially resolved. The test results indicate that the Latvian stock market might be inefficient and set up a ground for further research.

Keywords: Weak Form Efficiency, Genetic Algorithms, Latvian Stock Market

JEL Classification: C15, C61, G14, G15

Suggested Citation

Mihailov, Timur and Linowski, Dirk, Testing Efficiency of the Latvian Stock Market: An Evolutionary Perspective (February 20, 2002). Available at SSRN: https://ssrn.com/abstract=302285 or http://dx.doi.org/10.2139/ssrn.302285

Timur Mihailov

Independent ( email )

Dzirnavu 3A-1
Riga LV-1050

Dirk Linowski (Contact Author)

University of Nijmegen, Nijmegen School of Management ( email )

Thomas van Aquinostraat 1
Postbus 9108
6500 HK Nijmegen
Netherlands
++ 31 24 36 11 268 (Phone)
++ 31 24 36 11 933 (Fax)

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