Are Asian stock markets efficient? Evidence from new multiple variance ratio tests
AbstractThis paper tests for the martingale hypothesis in the stock prices of a group of Asian markets. We use new multiple variance ratio tests based on the wild bootstrap and signs. These are non-parametric finite sample tests, which do not rely on large sample theories for statistical inference. This paper also presents Monte Carlo results that these non-parametric tests show superior small sample properties to those of the conventional Chow-Denning test. Both weekly and daily data from 1990 are considered, while moving sub-sample windows are used for the latter to control the sensitivity of the results to a particular sample period. It is found that the Hong Kong, Japanese, Korean and Taiwanese markets have been efficient in the weak-form. The markets of Indonesia, Malaysia and Philippines have shown no sign of market efficiency, despite financial liberalization measures implemented since the eighties. We have also found evidence that the Singaporean and Thai markets have become efficient after the Asian crisis. In general, the results point toward the notion that the pricing efficiency of a market depends on the level of equity market development as well as the regulatory framework conducive of transparent corporate governance.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Empirical Finance.
Volume (Year): 15 (2008)
Issue (Month): 3 (June)
Contact details of provider:
Web page: http://www.elsevier.com/locate/jempfin
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marian Berneburg, 2004. "Are European Equity Style Indexes Mean Reverting? Testing the Validity of the Efficient Market Hypothesis," IWH Discussion Papers 193, Halle Institute for Economic Research.
- Burton Malkiel & Sendhil Mullainathan & Bruce Stangle, 2005. "Market Efficiency versus Behavioral Finance," Journal of Applied Corporate Finance, Morgan Stanley, vol. 17(3), pages 124-136.
- Andrew W. Lo & Craig A. MacKinlay, .
"The Size and Power of the Variance Ratio Test in Finite Samples: A Monte Carlo Investigation,"
Rodney L. White Center for Financial Research Working Papers
28-87, Wharton School Rodney L. White Center for Financial Research.
- Lo, Andrew W. & MacKinlay, A. Craig, 1989. "The size and power of the variance ratio test in finite samples : A Monte Carlo investigation," Journal of Econometrics, Elsevier, vol. 40(2), pages 203-238, February.
- Andrew W. Lo & A. Craig MacKinlay, 1988. "The Size and Power of the Variance Ratio Test in Finite Samples: A Monte Carlo Investigation," NBER Technical Working Papers 0066, National Bureau of Economic Research, Inc.
- Black, Fischer, 1986. " Noise," Journal of Finance, American Finance Association, vol. 41(3), pages 529-43, July.
- Lehmann, Bruce N, 1990. "Fads, Martingales, and Market Efficiency," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 1-28, February.
- Richardson, Matthew & Smith, Tom, 1991. "Tests of Financial Models in the Presence of Overlapping Observations," Review of Financial Studies, Society for Financial Studies, vol. 4(2), pages 227-54.
- Chow, K. Victor & Denning, Karen C., 1993.
"A simple multiple variance ratio test,"
Journal of Econometrics,
Elsevier, vol. 58(3), pages 385-401, August.
- Tom Doan, . "CHOWDENNING: RATS procedure to perform Chow-Denning multiple variance ratio test," Statistical Software Components RTS00035, Boston College Department of Economics.
- Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
- Lee, Cheng F & Chen, Gong-meng & Rui, Oliver M, 2001. "Stock Returns and Volatility on China's Stock Markets," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 24(4), pages 523-43, Winter.
- Savin, N.E., 1984. "Multiple hypothesis testing," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 14, pages 827-879 Elsevier.
- Yilmaz, Kamil, 2003. "Martingale Property of Exchange Rates and Central Bank Interventions," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(3), pages 383-95, July.
- Jorge Belaire-Franch & Kwaku Opong, 2005. "A Variance Ratio Test of the Behaviour of Some FTSE Equity Indices Using Ranks and Signs," Review of Quantitative Finance and Accounting, Springer, vol. 24(1), pages 93-107, January.
- Richardson, Matthew, 1993. "Temporary Components of Stock Prices: A Skeptic's View," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(2), pages 199-207, April.
- Whang, Yoon-Jae & Kim, Jinho, 2003. "A multiple variance ratio test using subsampling," Economics Letters, Elsevier, vol. 79(2), pages 225-230, May.
- Kawakatsu, Hiroyuki & Morey, Matthew R, 1999. "An Empirical Examination of Financial Liberalization and the Efficiency of Emerging Market Stock Prices," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 22(4), pages 385-411, Winter.
- Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-73, April.
- Elena Andreou & Eric Ghysels, 2002.
"Detecting multiple breaks in financial market volatility dynamics,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 17(5), pages 579-600.
- Elena Andreou & Eric Ghysels, 2001. "Detecting Multiple Breaks in Financial Market Volatility Dynamics," University of Cyprus Working Papers in Economics 0202, University of Cyprus Department of Economics.
- Elena Andreou & Eric Ghysels, 2001. "Detecting Mutiple Breaks in Financial Market Volatility Dynamics," CIRANO Working Papers 2001s-65, CIRANO.
- De Bondt, Werner F M & Thaler, Richard, 1985. " Does the Stock Market Overreact?," Journal of Finance, American Finance Association, vol. 40(3), pages 793-805, July.
- Bruce N. Lehmann, 1990. "Fads, Martingales, and Market Efficiency," NBER Working Papers 2533, National Bureau of Economic Research, Inc.
- Andrew W. Lo & A. Craig MacKinlay, 1989.
"Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test,"
NBER Working Papers
2168, National Bureau of Economic Research, Inc.
- Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
- Lo, Andrew W, 1991.
"Long-Term Memory in Stock Market Prices,"
Econometric Society, vol. 59(5), pages 1279-313, September.
- Andrew W. Lo, 1989. "Long-term Memory in Stock Market Prices," NBER Working Papers 2984, National Bureau of Economic Research, Inc.
- Lo, Andrew W. (Andrew Wen-Chuan), 1989. "Long-term memory in stock market prices," Working papers 3014-89., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Tom Doan, . "RSSTATISTIC: RATS procedure to compute R/S Statistic (classical or Lo's modified)," Statistical Software Components RTS00191, Boston College Department of Economics.
- Belaire-Franch, Jorge & Opong, Kwaku K., 2005. "Some evidence of random walk behavior of Euro exchange rates using ranks and signs," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1631-1643, July.
- Ayadi, O. Felix & Pyun, C. S., 1994. "An application of variance ratio test to the Korean securities market," Journal of Banking & Finance, Elsevier, vol. 18(4), pages 643-658, September.
- Kuo-Ping Chang & Kuo-Shiuan Ting, 2000. "A variance ratio test of the random walk hypothesis for Taiwan's stock market," Applied Financial Economics, Taylor and Francis Journals, vol. 10(5), pages 525-532.
- Hyun-Jung Ryoo & Graham Smith, 2002. "Korean stock prices under price limits: variance ratio tests of random walks," Applied Financial Economics, Taylor and Francis Journals, vol. 12(8), pages 545-553.
- Jeremy Berkowitz & Lutz Kilian, 1996.
"Recent developments in bootstrapping time series,"
Finance and Economics Discussion Series
96-45, Board of Governors of the Federal Reserve System (U.S.).
- Kim, Jae H., 2006. "Wild bootstrapping variance ratio tests," Economics Letters, Elsevier, vol. 92(1), pages 38-43, July.
- Eduardo Jose Araujo Lima & Benjamin Miranda Tabak, 2004. "Tests of the random walk hypothesis for equity markets: evidence from China, Hong Kong and Singapore," Applied Economics Letters, Taylor and Francis Journals, vol. 11(4), pages 255-258.
- Montagnoli, Alberto & de Vries, Frans P., 2010. "Carbon trading thickness and market efficiency," Energy Economics, Elsevier, vol. 32(6), pages 1331-1336, November.
- Cajueiro, Daniel O. & Gogas, Periklis & Tabak, Benjamin M., 2009. "Does financial market liberalization increase the degree of market efficiency? The case of the Athens stock exchange," International Review of Financial Analysis, Elsevier, vol. 18(1-2), pages 50-57, March.
- Verheyden, Tim & De Moor, Lieven & Van den Bossche, Filip, 2013. "A Tale of Market Efficiency," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/408701, Katholieke Universiteit Leuven.
- Tsoukas, Serafeim, 2011.
"Firm survival and financial development: Evidence from a panel of emerging Asian economies,"
Journal of Banking & Finance,
Elsevier, vol. 35(7), pages 1736-1752, July.
- Serafeim Tsoukas, 2012. "Firm Survival and Financial Development: Evidence from a Panel of Emerging Asian Economies," Working Papers 142012, Hong Kong Institute for Monetary Research.
- Azad, A.S.M. Sohel, 2009. "Random walk and efficiency tests in the Asia-Pacific foreign exchange markets: Evidence from the post-Asian currency crisis data," Research in International Business and Finance, Elsevier, vol. 23(3), pages 322-338, September.
- Amélie Charles & Olivier Darné & Jae H. Kim, 2010.
"Exchange-Rate Return Predictability and the Adaptive Markets Hypothesis: Evidence from Major Foreign Exchange Rates,"
- Charles, Amélie & Darné, Olivier & Kim, Jae H., 2012. "Exchange-rate return predictability and the adaptive markets hypothesis: Evidence from major foreign exchange rates," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1607-1626.
- Doyle, John R. & Chen, Catherine H., 2013. "Patterns in stock market movements tested as random number generators," European Journal of Operational Research, Elsevier, vol. 227(1), pages 122-132.
- repec:ltr:wpaper:2009.01 is not listed on IDEAS
- Hatemi-J, Abdulnasser, 2012. "Is the UAE stock market integrated with the USA stock market? New evidence from asymmetric causality testing," Research in International Business and Finance, Elsevier, vol. 26(2), pages 273-280.
- Abul Shamsuddin & Jae H Kim, 2009.
"Short-Horizon Return Predictability in International Equity Markets,"
2009.01, School of Economics, La Trobe University.
- Abul Shamsuddin & Jae H. Kim, 2010. "Short-Horizon Return Predictability in International Equity Markets," The Financial Review, Eastern Finance Association, vol. 45(2), pages 469-484, 05.
- Charles, Amélie & Darné, Olivier, 2009. "The efficiency of the crude oil markets: Evidence from variance ratio tests," Energy Policy, Elsevier, vol. 37(11), pages 4267-4272, November.
- Kim, Jae H., 2009. "Automatic variance ratio test under conditional heteroskedasticity," Finance Research Letters, Elsevier, vol. 6(3), pages 179-185, September.
- Hung, Jui-Cheng, 2009. "Deregulation and liberalization of the Chinese stock market and the improvement of market efficiency," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 843-857, August.
- Ardliansyah, Rifqi, 2012. "Stock Market Integration and International Portfolio Diversification between U.S. and ASEAN Equity Markets," MPRA Paper 41958, University Library of Munich, Germany.
- Khan, Walayet & Vieito, João Paulo, 2012. "Stock exchange mergers and weak form of market efficiency: The case of Euronext Lisbon," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 173-189.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.