1 The Efficient Market Hypothesis Chapter 11 Bodi

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1 The Efficient Market Hypothesis Chapter 11 Bodi Kane Marcus Ch 5

1 The Efficient Market Hypothesis Chapter 11 Bodi Kane Marcus Ch 5

2 Bodi Kane Marcus Ch 5 Random Walks and The Efficient Market Hypothesis •

2 Bodi Kane Marcus Ch 5 Random Walks and The Efficient Market Hypothesis • Random Walks : The theory that stock price changes have the same distribution and are independent of each other, so the past movement or trend of a stock price or market cannot be used to predict its future movement.

3 Bodi Kane Marcus Ch 5 Random Walks and The Efficient Market Hypothesis •

3 Bodi Kane Marcus Ch 5 Random Walks and The Efficient Market Hypothesis • The Efficient Market Hypothesis: An investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices.

4 Bodi Kane Marcus Ch 5

4 Bodi Kane Marcus Ch 5

5 Bodi Kane Marcus Ch 5 Random Walks and The Efficient Market Hypothesis •

5 Bodi Kane Marcus Ch 5 Random Walks and The Efficient Market Hypothesis • Competition as the source of efficiency • Versions of the efficient market hypothesis • Weak form EMH • Semi strong EMH • Strong form EMH Weak form EMH Semistrong Form EMH Strong form EMH

6 Bodi Kane Marcus Ch 5 Implication of the EMH • Technical analysis •

6 Bodi Kane Marcus Ch 5 Implication of the EMH • Technical analysis • Fundamental analysis • Active versus passive portfolio management

7 Bodi Kane Marcus Ch 5 Implication of the EMH • Technical analysis: A

7 Bodi Kane Marcus Ch 5 Implication of the EMH • Technical analysis: A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. • Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

8 Bodi Kane Marcus Ch 5 Implication of the EMH • Fundamental analysis :

8 Bodi Kane Marcus Ch 5 Implication of the EMH • Fundamental analysis : A method of evaluating a security by attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. • Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors and individually specific factors.

9 Bodi Kane Marcus Ch 5 Implication of the EMH • Active versus passive

9 Bodi Kane Marcus Ch 5 Implication of the EMH • Active versus passive portfolio management • Active asset management is based on a belief that a specific style of management or analysis can produce returns that beat the market • Passive asset management is based on the belief that: Markets are efficient, Market returns, cannot be surpassed regularly over time, Low-cost investments held for the long-term will provide the best returns.

10 Bodi Kane Marcus Ch 5 Event studies • An empirical study performed on

10 Bodi Kane Marcus Ch 5 Event studies • An empirical study performed on a security that has experienced a significant catalyst occurrence, and has subsequently changed dramatically in value as a result of that catalyst. The event can have either a positive or negative effect on the value of the security.

11 Bodi Kane Marcus Ch 5 Studi Empirik Event Study di Indonesia • Pengaruh

11 Bodi Kane Marcus Ch 5 Studi Empirik Event Study di Indonesia • Pengaruh pengumuman merger dan akuisisi (Anggraini Kurniawan, 2001) • Analisa pengaruh lebaran sebagai bentuk anomali pada pasar saham di bursa efek jakarta (event study peristiwa lebaran tahun 2001, Dwi Nur Indahsari, 2002) • Reaksi pasar modal indonesia terhadap peristiwa politik dalam negeri (event study : peristiwa pelantikan Megawati Soekarnoputri sebagai Presiden RI ke-5) (Elizabeth Alim, 2002) • Pengaruh pengumuman right issue terhadap kinerja perusahaan dan abnormal return serta volume perdagangan saham (event study terhadap-perusahaan manufaktur yang listing di Bursa Efek Jakarta (Daniel Wibisono, 2003)

12 Bodi Kane Marcus Ch 5 Studi Empirik Event Study di Indonesia • Reaksi

12 Bodi Kane Marcus Ch 5 Studi Empirik Event Study di Indonesia • Reaksi pasar terhadap publikasi laporan keuangan (event study pada perusahaan non manufaktur yang terdaftar di BEJ tahun 2004 -2006 (Siswojo, Ivana M, 2007) • Reaksi pasar terhadap publikasi laporan keuangan (event study pada perusahaan manufaktur yang terdaftar di BEJ tahun 2004 -2006) (Thedja, Caroline, 2007) • Analisa perbedaan abnormal return dan trading volume activity sebelum dan sesudah pemilu 1999 dan 2004 (analisa pada emitmen yang tergolong lq 45 pada periode 1999 dan 2004) (Wibowo, Nur Cahyo, 2009)

13 Bodi Kane Marcus Ch 5 Studi Empirik Event Study di Indonesia • Analisis

13 Bodi Kane Marcus Ch 5 Studi Empirik Event Study di Indonesia • Analisis January effect pada IHSG, indeks LQ 45, dan saham individual (studi kasus terhadap 34 saham yang diperdagangkan periode 1997 -2002 (Fitriani, Alexandra, 2003) • Analisis terjadinya january effect dan pengaruhnya terhadap return obligasi korporasi di bursa efek Surabaya tahun 2003 (Caroline, Nesia, 2005) • Pengujian day-of-the-week effect pada bursa efek Jakarta periode 1 Juli 1997 -31 Juli 1998 (Helen, 1999)

14 Bodi Kane Marcus Ch 5 Are market Efficient ? • The issues ▫

14 Bodi Kane Marcus Ch 5 Are market Efficient ? • The issues ▫ The magnitude issue ▫ The selection bias issue ▫ The lucky event issue

15 Bodi Kane Marcus Ch 5 Weak form tests: Patterns in stock returns •

15 Bodi Kane Marcus Ch 5 Weak form tests: Patterns in stock returns • Returns over short horizons • Returns over long horizons

16 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies • The small

16 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies • The small firm in January effects • The neglected firm effect and liquidity effect • Book to market ratios • Post-earnings announcements price drift

17 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies • The small

17 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies • The small firm in January effects

18 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies • The neglected

18 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies • The neglected firm effect and liquidity effect • Neglected firms are usually the smaller firms that analysts tend to ignore. • Information available on these smaller companies tends to be limited to those items that are required by law, such as the 10 -K. Blue-chip firms, on the other hand, have a higher profile, which provides large amounts of high quality information (to institutional investors such as pension or mutual fund companies.

19 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies • Book to

19 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies • Book to market ratios

20 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies • Post-earnings announcements

20 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies • Post-earnings announcements price drift

21 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies

21 Bodi Kane Marcus Ch 5 Semi strong tests: Market anomalies

22 Bodi Kane Marcus Ch 5 Strong form tests: • Inside information • Interpreting

22 Bodi Kane Marcus Ch 5 Strong form tests: • Inside information • Interpreting the evidence • Mutual fund analyst performance Risk premiums or inefficiencies • Anomalies or data mining

23 Bodi Kane Marcus Ch 5 Strong form tests: • Inside information • Interpreting

23 Bodi Kane Marcus Ch 5 Strong form tests: • Inside information • Interpreting the evidence • Mutual fund analyst performance Risk premiums or inefficiencies • Anomalies or data mining

24 Bodi Kane Marcus Ch 5 Strong form tests: • Inside information • Interpreting

24 Bodi Kane Marcus Ch 5 Strong form tests: • Inside information • Interpreting the evidence

25 Bodi Kane Marcus Ch 5 Strong form tests: • Mutual fund analyst performance

25 Bodi Kane Marcus Ch 5 Strong form tests: • Mutual fund analyst performance Risk premiums or inefficiencies • Anomalies or data mining

26 The Noisy market hypothesis and fundamental indexing Bodi Kane Marcus Ch 5 •

26 The Noisy market hypothesis and fundamental indexing Bodi Kane Marcus Ch 5 • Noisy Market Hypothesis contrasts the efficient market hypothesis in that it claims that the prices of securities are not always the best estimate of the true underlying value of the firm. It argues that prices can be influenced by speculators and momentum traders, as well as by insiders and institutions that often buy and sell stocks for reasons unrelated to fundamental value, such as for diversification, liquidity and taxes

27 The Noisy market hypothesis and fundamental indexing Bodi Kane Marcus Ch 5 •

27 The Noisy market hypothesis and fundamental indexing Bodi Kane Marcus Ch 5 • Fundamentally based indexes are indices in which stocks are weighted by one of many economic fundamental factors, especially accounting figures which are commonly used when performing corporate valuation, or by a composite of several fundamental factors

28 Bodi Kane Marcus Ch 5 Mutual fund analyst performance • Stock market analyst

28 Bodi Kane Marcus Ch 5 Mutual fund analyst performance • Stock market analyst

29 Bodi Kane Marcus Ch 5 Mutual fund analyst performance • Mutual Fund Managers

29 Bodi Kane Marcus Ch 5 Mutual fund analyst performance • Mutual Fund Managers

30 Bodi Kane Marcus Ch 5 Mutual fund analyst performance • Mutual Fund Managers

30 Bodi Kane Marcus Ch 5 Mutual fund analyst performance • Mutual Fund Managers

31 Bodi Kane Marcus Ch 5 Mutual fund analyst performance • Stock market analyst

31 Bodi Kane Marcus Ch 5 Mutual fund analyst performance • Stock market analyst • Survivorship bias in mutual fund studies ▫ The managers who perform well in one period tend to be above average performers in subsequent periods ▫ Empirical studies: 600 managers in mutual fund company (Tab 11. 2) First Period Second Period Winners Losers Winners 0. 25 Losers 0. 25

32 Bodi Kane Marcus Ch 5 Mutual fund analyst performance • So, are markets

32 Bodi Kane Marcus Ch 5 Mutual fund analyst performance • So, are markets efficient? ▫ Markets are very efficient, but that rewards to the especially diligent, intelligent, or creative may in fact be waiting ▫ (Pasar sangat efisien, tetapi imbalan masih tetap menunggu bagi mereka yang paling rajin, cerdas atau kreatif )

33 Tugas Kelompok Klp Felix RDPU Venny Schroder Dana Likuid Schroder Dana Obl Panin

33 Tugas Kelompok Klp Felix RDPU Venny Schroder Dana Likuid Schroder Dana Obl Panin Dana Ekstra Unggulan Timothy Manulife DK Manulife Obl Ngr Hilda Mathew Ivana Gentry Mandiri Investa PU Mandiri Investa DU Mandiri Investa Aktif Atraktif Mandiri Investa PU Fortis r. UPIAH Plus Panin Dana Schroder Dana II Unggulan Prestasi Plus Manulife Dana. Pasar Uang Pendapatan Tetap Berimbang Ekuitas Batavia Dana Kas Manulife Obl Neg Manulife Dana Panin Dana Prima Maxima Indonesia Bertumbuh Berimbang Manulife Dana Kas Manulife Obl Manulife Dan Stabil Manulife Dana Unggulan Berimb Saham Danny RDPT Bodi Kane Marcus Ch 5 Mandiri Investa PU Fortis Prima II RDC RDS Fortis Pesona Schroder Dana Prestasi Plus Panin Dana Maxima Fortis Ekuitra Manulife Saham Andalan

34 Reksadana Manulife • • • Bodi Kane Marcus Ch 5 Manulife Dana Pasar

34 Reksadana Manulife • • • Bodi Kane Marcus Ch 5 Manulife Dana Pasar Uang Syariah Manulife Pendapatan Tetap Dollar (Rp) Manulife Pendapatan Tetap Dollar (USD) Manulife Dana Ekuitas Syariah Manulife Dana Berimbang Manulife Pendapatan Tetap Korporasi Manulife Pendapatan Tetap Negara Manulife Dana Ekuitas Indonesia - China (Rp) Manulife Dana Ekuitas Indonesia - China (USD) • Fund Fact Sheet • http: //www. manulife-indonesia. com/Front/FFS. htm

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