Semi-Strong Form Efficiency in the Baltic Stock Markets under Changing Economic Situation
This study is designed to test semi-strong form efficiency in the Baltic stock markets and to identify investors’ behaviour under changing economic situation. It involves description of semi-strong form of stock market efficiency and discusses the results of other studies in the field. Analysis and summary of previous research results revealed that there is a lot of studies test semi-strong form efficiency in various stock markets, but very few analysed Baltic stock markets especially under changing economic situation. This research was based on event studies using Patell’s, BMP and cumulative abnormal return tests. The chosen research period of 2000–2016 was divided into two sub-periods by real GDP: 2000–2008 and 2009–2016. The research results showed that Lithuanian, Latvian and Estonian stock markets were not efficient in semi-strong form in neither of the sub-periods. The proposition that thin stock markets are not efficient was confirmed, allowing investors in Baltic stock markets to earn abnormal returns. Moreover, in the second sub-period the average abnormal returns increased in all analysed markets, potentially due to increased distrust and precaution of investors. The only exception were the results of Patell’s test: in Lithuanian and Estonian companies event announcements affected stock prices significantly stronger in the second sub-period, while in Latvian, contrarily, in the first one.