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THE MOMENTUM EFFECT EXEMPLIFIES THE INFLUENCE OF INVESTORS’ IRRATIONAL BEHAVIOUR ON CHANGING PRICES OF SHARES AND STOCKS: AN ANALYSIS OF THE MOMENTUM EFFECT ON THE WARSAW STOCK EXCHANGE

100%

Merło P., Konarzewski P.

Finansowy Kwartalnik Internetowy e-Finanse

2015

vol. 11

issue 1

56-64

An efficient market should not show any anomalies. When new information reaches a market which is efficient, it should automatically translate into prices of assets, which ought to eliminate the possibility of gaining an advantage over other investors, thus preventing excess profits. However, studies on capital markets indicate that in reality it is possible to earn unusually high profits by taking advantage of certain anomalies which occur on a given market. Among such anomalies there is the momentum effect. This study performed on the Stock Exchange in Warsaw has shown that the momentum effect occurred throughout the entire analyzed time period. Positive returns demonstrated for investment strategies based on the momentum effect were unexplainable by the classical theory of finances. A correlation was found between the economic situation on the stock exchange and portfolio return rates, but it was too weak to attribute the effect to a single decisive factor. In addition, the returns from investments based on the momentum effect were statistically higher in January than in the other months, which was caused by the January effect, stimulating the occurrence of statistically higher returns at the beginning of a year rather than later on during the analyzed period of time. Research in this field carried out in other countries justifies the claim that there are many irrational factors which together create the momentum effect on the stock exchange. Thus, it is possible to conclude that irrational decisions may have strong impact on the pricing of stocks on the capital market. The momentum effect persisted throughout the entire analyzed period, although its power changed cyclically, which coincides with results of research carried out in other countries. The fact that the momentum effect did not disappear may suggest that the factors involved in its creation are an indispensable part of the market, and this seems to undermine the commonly accepted hypothesis about the efficiency of capital markets.

Behavioural Aspects of Benchmark Quotation – the WIBOR Case

84%

Mielus P.

Acta Universitatis Lodziensis. Folia Oeconomica

2018

vol. 3

issue 335

189-205

W postkryzysowym środowisku jednym z elementów rynku finansowego, które wymagają sanacji, są indeksy rynkowe. Rozporządzenie UE w sprawie indeksów stosowanych jako wskaźniki w instrumentach finansowych wskazuje na potrzebę reformy sposobu wyznaczania indeksów w celu zapewnienia ich przejrzystości, reprezentatywności i odporności na manipulacje. Proces reformy wprowadza zmianę zachowania po stronie podmiotów kontrybuujących stawki (tzw. panelistów). Artykuł analizuje behawioralne reakcje po stronie panelistów indeksu WIBOR, wskazując na źródła wzrostu inercji i zmniejszenia dyspersji publikowanych stawek. Reakcje te zmniejszają ryzyko banków, zwiększając jednocześnie dywergencję między indeksem a rzeczywistym kosztem pieniądza, co może stanowić zagrożenie dla stabilności rynku finansowego.

In the post‑crisis environment, market indices are one of elements of the financial market which have to be reformed. The EU Regulation on indices used as benchmarks in financial instruments reflects a need for the reform of benchmark determination in order to make indices transparent, representative and resistant to manipulation. The reform changes the conduct of rate contributors (the so‑called panellists). The article analyses behavioural reactions of WIBOR panellists by indicating sources of the growth of inertia and the drop of dispersion of published benchmarks. Those reactions decrease the risk of banks and, at the same time, increase the divergence between an index and the actual cost of funds, which may threaten the stability of the financial market.

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1 Acta Universitatis Lodziensis. Folia Oeconomica

1 Finansowy Kwartalnik Internetowy e-Finanse

1 2018

1 2015

1 Konarzewski P.

1 Merło P.

1 Mielus P.

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THE MOMENTUM EFFECT EXEMPLIFIES THE INFLUENCE OF INVESTORS’ IRRATIONAL BEHAVIOUR ON CHANGING PRICES OF SHARES AND STOCKS: AN ANALYSIS OF THE MOMENTUM EFFECT ON THE WARSAW STOCK EXCHANGE

Behavioural Aspects of Benchmark Quotation – the WIBOR Case