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Weak-form Market Efficiency and Calendar Anomalies for Eastern Europe Equity Markets

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Author Info

  • Francesco Guidi

    (International Business and Economics, University of Greenwich, London SE10 9LS. E-mail: f.guidi@gre.ac.uk)

  • Rakesh Gupta

    (Finance and Economics, Griffith Business School, Griffith University, Nathan Campus QLD 4111, Australia. E-mail: r.gupta@griffith.edu.au)

  • Suneel Maheshwari

    (Legal Environment, Marshall University, Huntington, WV, USA. E-mail: Maheshwari@marshall.edu)

Abstract

In this article we test the weak form of the efficient market hypothesis for Central and Eastern Europe (CEE) equity markets for the period 1999–2009. To test weak-form efficiency in the markets, this study uses autocorrelation analysis runs test and variance ratio test. We find that stock markets of the CEE do not follow a random walk process. This is an important finding for the CEE markets as an informed investor can identify mispriced assets in the markets by studying the past prices in these markets. We also test the presence of daily anomalies for the same group of stock markets using a basic model and a more advanced Generalised Autoregressive Conditional Heteroscedasticity in Mean (GARCH-M) model. Results indicate that day-of-the-week effect is not evident in most markets except for some. Overall results indicate that some of these markets are not weak and an efficient and informed investor can make abnormal profits by studying the past prices of the assets in these markets.

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Bibliographic Info

Article provided by Institute for Financial Management and Research in its journal Journal of Emerging Market Finance.

Volume (Year): 10 (2011)
Issue (Month): 3 (December)
Pages: 337-389

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Handle: RePEc:sae:emffin:v:10:y:2011:i:3:p:337-389

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Web page: http://www.ifmr.ac.in

Related research

Keywords: JEL Classification: G12; JEL Classification: G14; JEL Classification: G22; Emerging stock markets; day-of-the-week effect; market efficiency; variance ratio test; GARCH-M;

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References

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Citations

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Cited by:
  1. Graham Smith, 2012. "The changing and relative efficiency of European emerging stock markets," The European Journal of Finance, Taylor & Francis Journals, vol. 18(8), pages 689-708, September.
  2. Joanna Olbrys & Elzbieta Majewska, 2014. "Implications of market frictions: serial correlations in indexes on the emerging stock markets in Central and Eastern Europe," Operations Research and Decisions, Wroclaw University of Technology, Institute of Organization and Management, vol. 1, pages 51-70.
  3. Stavarek, Daniel & Heryan, Tomas, 2012. "Day of the week effect in central European stock markets," MPRA Paper 38431, University Library of Munich, Germany.
  4. Priit Sander & Risto Veiderpass, 2012. "Testing the Turn-of-the-Year Effect on Baltic Stock Exchanges," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 5(2), pages 145-154, December.

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