Virtual and computer games are rapidly increasing with the introduction of the smartphone and the app stores across multiple platforms and devices with an increase in games with virtual economies. This dissertation will analyse the efficient market hypothesis, along with commonly known anomalies and information announcements. It will find out whether there are market inefficiencies in virtual games in the form of anomalies, more specifically the intra-day effect. The intra-day effect anomaly is one of many critiques of the efficient market hypothesis and there have been many studies conducted into the intra-day effect. Most research on the intra-day effect anomaly is concerning real world markets and the results have contradicted one another.
This study looks at the price change movements of 118 randomly quota sampled player cards within the market of FIFA Ultimate Team. Statistical analysis in the form of mean, standard deviation, and coefficients of variances tests were carried out to identify if there were any market anomalies and reactions to information announcements. A strong correlation between market inefficiencies, anomalies, and information announcements had been discovered within the research of the virtual market in FIFA Ultimate Team. The study actually found that because of an information announcement overreaction and an intra-day effect, at a specific time during a Wednesday, a player could sell their card for potentially 233% more than what they could have an hour earlier. This research study in turn supports that market anomalies do exist in games but it was also discovered that the market is semi-strong form efficient in its reaction post-information announcement.
Table of Contents
Chapter 1 - Introduction
1.1 Origin of Efficient Market Hypothesis
1.2 Aims and Objectives of the Research
1.3 Outline of the Chapters
Chapter 2 - Literature Review
2.1 Introduction
2.2 Market Efficiencies
2.3 Information Announcements in Capital Markets
2.4 Anomalies in Capital Markets
2.5 Intra-Day Effect
2.6 Judgments and Values in Computer Games
2.7 Common Exchange Mechanisms
2.8 Regulation of Virtual Markets
2.9 Chapter Summary
Chapter 3 - Methodology
3.1 Introduction
3.2 Research Questions
3.3 Quota Sampling
3.4 Method of Data Collection
3.5 Method of Data Analysis
3.6 Limitations and Validity of the Research Method
3.7 Ethical Consideration
3.8 Chapter Summary
Chapter 4 - Findings and Analysis
4.1 Introduction
4.2 Expected Results
4.3 Actual Results
4.4 Chapter Summary
Chapter 5 - Discussion
5.1 Introduction
5.2 Do in-game virtual markets suffer from the Intra-Day Effect?
5.3 What happens when new information becomes publicly available?
5.4 Does this reflect what happens in real world markets?
Chapter 6 - Conclusion
6.1 Implication of this Research
6.2 Limitations and Further Research
Research Objectives and Core Themes
The primary aim of this dissertation is to analyze the Efficient Market Hypothesis within the context of virtual economies, specifically investigating whether market anomalies like the intra-day effect exist and how these markets react to public information announcements.
- Analysis of Efficient Market Hypothesis in virtual environments.
- Examination of market anomalies, with a focus on the intra-day effect.
- Investigation of market reactions to public information announcements.
- Comparison of virtual market behaviors with real-world capital market patterns.
- Evaluation of market efficiency forms (weak, semi-strong, strong) in in-game economies.
Excerpt from the Book
2.4 Anomalies in Capital Markets
Many observed market movements are not explained by the arguments presented by the efficient market hypothesis contested earlier. In the standard finance theory, market movements that are inconsistent with the efficient market hypothesis are called anomalies (Bostanci, 2003). According to Tversky and Kahneman (1986) “an anomaly is a deviation from the presently accepted paradigms that is too widespread to be ignored, too systematic to be dismissed as random error, and too fundamental to be accommodated by relaxing the normative system” (p. 252). Examples of Anomalies in capital markets are; January Effect, Low Book Value Effect, Neglected Firm Effect, the Reversal Effect, Days of the Week Effect, Dogs of the Dow Effect and the Intra Day Effect. It is also worth mentioning the potential information announcement anomaly discussed in the previous section of this chapter as it does play a role in achieving abnormal returns in spite of the efficient market hypothesis.
Summary of Chapters
Chapter 1 - Introduction: This chapter introduces the Efficient Market Hypothesis and outlines the dissertation's aims to investigate this theory within a virtual FIFA football market.
Chapter 2 - Literature Review: The literature review critically analyzes existing research on market efficiency, information announcements, and various market anomalies to establish a theoretical framework.
Chapter 3 - Methodology: This chapter details the quota sampling of player cards, the secondary data collection methods from FUTBIN, and the statistical techniques used for analysis.
Chapter 4 - Findings and Analysis: This chapter presents the empirical results, comparing expected outcomes derived from literature with the actual findings regarding card price movements.
Chapter 5 - Discussion: The discussion interprets the research findings, addressing the core research questions regarding the intra-day effect and market reactions to new information.
Chapter 6 - Conclusion: The conclusion summarizes the study, confirming the existence of anomalies while noting the market's semi-strong form efficiency in reaction to announcements.
Keywords
VIRTUAL-MARKETS, EFFICIENT-MARKET-HYPOTHESIS, MARKET-ANOMALIES, INFORMATION-ANNOUNCEMENTS, INTRA-DAY-EFFECT, FIFA, FUT-COINS, PRICE-MOVEMENTS, SEMI-STRONG-FORM-EFFICIENCY, VOLATILITY, ARBITRAGE, SECONDARY-RESEARCH, DATA-ANALYSIS, MARKET-OVERREACTION
Frequently Asked Questions
What is the primary focus of this dissertation?
The study primarily investigates the validity of the Efficient Market Hypothesis within the virtual economic environment of the FIFA Ultimate Team game.
What are the core thematic fields covered?
The research covers financial market theory, specifically focusing on market efficiency, capital market anomalies, information announcements, and the behavior of virtual economies.
What is the main research question of the work?
The study aims to determine if in-game virtual markets experience the "intra-day effect," how they react to public information, and whether these behaviors parallel real-world market patterns.
Which scientific methods are employed?
The research uses secondary data collection through a quota sample of 118 player cards, applying statistical tests such as mean, standard deviation, and coefficient of variance analysis.
What topics are discussed in the main body?
The main body discusses the origin of EMH, a comprehensive review of literature on anomalies, the methodology for virtual market analysis, and a discussion of the empirical findings regarding price volatility.
Which keywords best characterize this research?
Key terms include Virtual-Markets, Efficient-Market-Hypothesis, Market-Anomalies, Information-Announcements, and Intra-Day-Effect.
How does the virtual market respond to new information?
The analysis shows that while there is an initial market overreaction to announcements, the market eventually demonstrates semi-strong form efficiency by readjusting to a new equilibrium.
What specific anomaly was identified in the FIFA market?
The study identified a significant intra-day effect on Wednesdays, characterized by extreme price volatility and a 233% price increase prior to the "Team of the Week" announcement.
- Quote paper
- Jason West (Author), 2015, An empirical study of efficient market hypothesis and its existence in virtual markets, Munich, GRIN Verlag, https://www.grin.com/document/359376
