Efficient market hypothesis: Case of the croatian capital market

Abstract

This study employs a quantile auto-regression approach in order to examine the market efficiency of the Croatian stock market using daily CROBEX returns in the period of 2000-2019. Auto-regression model AR (1) confirmed the significant influence of the previous day return, nevertheless model suffered from heteroscedasticity. In order to avoid the OLS restrictions, this paper applies the quantile unit root approach. According to the results of the quantile unit root weak form of the efficient market, the hypothesis was rejected. Endogenous shocks were found to be persistent and asymmetric. Model results stayed robust regardless of the structural break. This predictable behavior of CROBEX may enable investors to obtain abnormal profits.