Efficient Market Hypothesis and Calendar Effects: Evidence from the Oslo Stock Exchange

Stock market efficiency is an essential property of the market. It implies that rational, profit-maximazing investors are not able to consistently outperform the market since prices of stocks in the market are fair, that is, there are no undervalued stocks in the market. Market efficiency is divided into three forms: weak, semi-strong and strong. Weak form of market efficiency implies that technical analysis, utilizing historical data, cannot be used to predict future price movements, since all the historical information is impounded into the stock prices and price changes are random. Semi-strong form of market efficiency states that fundamental analysis does not create opportunity to earn abnormal returns, since all publicly available information is reflected in the stock prices. In market efficiency in its strong form, the price on stock reflects all the relevant information and knowledge of insider information will not create opportunity to earn abnormal returns. In practice, to have a perfectly efficient market is almost impossible. Investors do not always behave rationally, stocks can be priced «wrongly » due to presence of anomaly in price formation process or there can emerge a predictable pattern in stock price changes. All these distortions lead to less efficiency or inefficiency of the market and provide opportunit