Is the baltic stock market efficient : an empirical study 2000-2014
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- Master's theses (HH) 
The purpose of this master thesis is to report the findings of an investigation into the historical returns of the Baltic stock market and to determine if the market has reached the weak form of efficiency. To detect anomalies and to determine the form of market efficiency, the author of this thesis chose three econometric models: Autoregressive model (AR) linking current returns to past ones, Autoregressive Distributed Lag model (ADL), linking current returns of one index to the past returns of another index and utilizing Dummy Variable Approach to help find day-of-the-week effects. The author analyzed daily, weekly, and monthly data from 13 indices over a 14-year time period from January 2000 to August 2014. In addition to this, a separate 4 year period from 2010-2014 has been analyzed to look at the development after the financial crisis of 2008. The author found significant predictive power on future returns in historical data for the entire 14-year period. This trend has remained significant during the last four years, as well. These results indicate the possibility of forecasting future returns by looking at past returns. The author also found evidence of Granger causality in the stock exchanges of the three Baltic countries when analyzing the entire 14-year time period. The Lithuanian stock market Granger caused both the Estonian and Latvian stock markets, the Estonian stock market Granger caused both the Lithuanian and Latvian stock markets, and the Latvian stock market Granger caused the Estonian stock market. The period of the last four years was different in terms of this relationship, with only the Estonian stock market Granger causing the Latvian stock market. The author also found a significant “Monday effect” in the Baltic stock market. From this information the author has concluded that the Baltic stock market does not have a weak form of efficiency.