International Finance. Accounting, Finance, SPSS Research Paper

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INTERNATIONAL FINANCE
Part 1: Efficient Market Hypothesis
Efficient Market Hypothesis has been the fundamental proposition in international finance since the 1970s. Additionally it is the most researched hypotheses in social sciences. EMH is an investment theory that is derived from the theories of Eugene Fama’s in his book, ‘Efficient Capital Markets: A Review of Theory and Empirical Work’ in 1970. EMH states that all known information connected to investment securities such as stock is already replicated in the prices of these securities. Therefore, with EMH, all investors are equal because of the market equilibrium. The use of EMH is one of the main reason why investors prefer to use passive investment strategy. In the market, there is always a big number of purchasers and venders and the flow constantly efficient. The purpose of this section is to analyze three forms of EMH as well as the degree at which the present empirical proof supports each of the three types.
Strong Form EMH
The strong form of the EMH is the most convenient category of the EMH. Under this category, it is believed that the marketplace is normally effective if all the information is significant to the share whether it is accessible to the investors and is replicated on the market values of the products. According to EMH, investors cannot make any returns on their investments in case these investments can exceed the market returns irrespective of the information that is retrieved from the research. For example if the market prices are lower than the actual value, then it can be vindicated that by the same rate of the information that is privately held and the data of the holders can exploit the process by buying the shares. During this particular moment, investors will stop with drawing and purchasing from the market and this will result to an equilibrium. Therefore it is the strongest category of the EMH and the most convenient.
The strong tests of the effective markets model are pertained with the available information that is reflected in prices such that no individual has higher profits in the market. Different authors have conducted some research about the EMH and have provided some empirical evidence on the same. For example, Potoski & Swist (2012) carried out a research on the strong form efficiency based on assumptions that financial institutions use references available to access to information that investors do not have access to. They used samples of 3,270 samples between 2005 and 2010. The results indicate evidence that the strong form of EMH has the features of the WIG 20 index shares outlined on the Warsaw Stock Exchange. Based on these three empirical studies, there are mixed findings of both the strong and weak forms of EPM. Furthermore, different methodologies have been used to study and test a strong form of hypotheses in different countries. 
Semi-Strong Form of EMH
This form of EMH states that a market can only be resourceful if only all the pertinent information that is available to the public is replicated in the market price. Under this form, the market must immediately résumé the publication of any suitable and new information by moving the market price to another level. The new standard of equilibrium should reflect the changes in demand and supply changes resulting in the latest news. However, this form of EMH faces the challenge with the identification of immediate information that is available to the public. In most cases, the information is not convenient enough to show the shares it affects and the ones that will remain unaffected. Ojo and Azeez (2012, 10) asserts that the semi-strong form has three assumptions;
1. The shares will adjust instantaneously to the new publicly available information.
2. The essential analysis will not yield additional returns.
3. Its testing will adapt to past data, which has a greater magnitude. 
To empirically test this level, Torun and Kurt (2007) carried out a research on how the weak and semi-strong EMH forms affect the European Monetary Union countries. The study used the data available price index prices available on the stock market, euro purchasing power, and the rate of unemployment in those countries. They applied the classical unit-roots, co-integration, and casualty tests for the year 2000-2007. Empirical results indicated that the European Monetary Union markets use the weak form of EPM. Furthermore, this study concluded that the casualty and co-integration analysis does not conform to the semi-strong way. Another survey by Cooray and Wickremasinghe (2007) scrutinized the productivity of stock markets in Bangladesh, Pakistan, Sri Lanka, and India between 1996 and 2005. The research used the Elliot-Rothenberg-Stock (ERS), Phillips-Perron (PP), and Dickey-Fuller Generalized Least Square (DF-GLS). Their results found out that these stock markets were conversant with the standard unit root tests. These empirical shreds of evidence show that the weak and semi-strong levels of EMH are rational, and there are no systematic forecast errors identified.
Weak Form of EMH
It is the third and the less aggressive form of EMH, which is characterized by only a piece of single information on the historical data of the share price available on the public report. The weak form states that the new information must not be related to any knowledge of the past. If at all, the information will be associated with the previous one, then it will not be considered as new (Sing and Sapna, 2013). Therefore, this form assumes that every movement of the stock market price that responds to the latest information should not be predicted from any last change. Thus, the development of the market price should be random because the future cannot be predicted from the costs of the past.
Gilani, Nawaz, Shakoor, and Asab (2014, 1834), is an example of another emphirical study whereby the authors examined weak form efficiency in the Islamabad Stock Market (ISE) in 2013. The authors used the run test and the ADF test methods to research the weak ISE-10 share index. After evaluation, the run test indicated that there was market inefficiency during explicit periods. Nevertheless, the ADF test indicated that the ISE had market efficiency in its weakest form (Sheefeni, 2016, 1836). A research by Sing & Sapna (2013) scrutinized the weak-form efficiency in the stock exchange markets of five diverse Asian nations. The outcomes o...