Analysis of efficiency of the Russian stock market

Abstract

Aim of the research is to evaluate the Efficient Market Hypothesis using the ESA method, by examining the corresponding reactions of highly liquid stocks in the Russian markets to new analyst reports. According to this we set the following research questions: (1) Is there a market reaction to the publication of sell-side analysts’ reports in Russian stock market (sample of MICEX10 companies)? (2) Are there any differences in market reactions to analysts’ reports depending on the types of brokerage houses analysts are employed by? (3) Are there any differences in market reactions to analysts’ reports depending on the direction of change in the target prices? (4) Are there any differences in market reactions to analysts’ reports depending on the type of analysts’ recommendations and the changes in analysts’ recommendations? Current study showed that the EMH cannot be rejected for the most liquid stocks, However, the completely different story evolves when one starts to go down the liquidity staircase: less liquid names like Severstal, Uralkali and Surgutneftegas tend to demonstrate significant reactions to the new analysts’ reports and thus the EMH for this stocks can be rejected.