Predictability, price bubbles, and efficiency in the Indonesian Stock Market

Deskripsi

I examine the return predictability of the Indonesian stock-market during 1984?2016, in rolling windows, using an automatic portmanteau test and an automatic variance ratio. I find that the market's efficiency and predictability vary over time?consistent with the adaptive market hypothesis?with returns being less predictable in recent periods, a sign of improving efficiency. I also find that a simple buy-and-hold investment strategy outperforms several technical trading rules, even after adjusting for risk. Furthermore, I find evidence of explosive behaviour in Indonesian stock prices and detect multiple bubbles, using sequential right-tailed unit-root tests..