The possibilities for a Swedish investor to predict future stock returns: Testing if the OMXSPI exhibits Weak-form market efficiency between 1995-2023

Sammanfattning

Ever since the introduction of the Efficient Market Hypothesis by Eugene F. Fama in the 1970s, financial economists are trying to test whether stock markets are weak-form efficient or not. This implies that stock returns are generated randomly, and hence creates no room for outperforming the “buy-and-hold” investor. While previous literature on the Swedish stock market is limited to the 1900s, our study further investigates how these results have changed up until today. By testing for random walks in the OMXSPI between 1995-2023 we contribute to the financial field as our results contradict implications from the past. In addition to this, a recurring theme seen in previous studies is the usage of statistical models instead of economical models. It is evident according to our econometric models that we cannot overlook that stock returns are randomly generated, hence showing signs of weak-form market efficiency. Notwithstanding, it seems as if stock volatilities inherit an opposite characteristic when applying an economical model instead of statistical.