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Stock exchange efficiency and convergence: international evidence

Author

Listed:
  • Ephraim Clark

    (Middlesex University Business School)

  • Zhuo Qiao

    (University of Macau)

Abstract

This paper measures the efficiency and convergence of 37 stock exchanges in 35 countries over the period from 2006 to 2014, a period that encompasses a full business cycle of growth, recession and recovery. We combine a multi-stage data envelopment analysis with the window analysis approach to filter out the impact of economic environmental variables on stock exchange efficiency in the provision of trading services and track the efficiency changes over time. We show that economic growth, inflation and financial development are important drivers of efficiency. Lagging stock exchanges are catching up to the leading stock exchanges in terms of technical efficiency, pure technical efficiency and scale efficiency. Exchanges in developed countries converge faster than those in the emerging countries and the dispersion of the efficiency levels over the whole sample and the subsamples of developed vs emerging country stock exchanges diminished. Finally, stock exchanges in emerging countries are catching up to the stock exchanges in the developed countries and the dispersion of the efficiency levels between them also diminished. Overall, our findings indicate that integration has taken place in the stock exchange industry over the sample period.

Suggested Citation

  • Ephraim Clark & Zhuo Qiao, 2022. "Stock exchange efficiency and convergence: international evidence," Annals of Operations Research, Springer, vol. 313(2), pages 855-875, June.
    • Handle: RePEc:spr:annopr:v:313:y:2022:i:2:d:10.1007_s10479-020-03869-1
    DOI: 10.1007/s10479-020-03869-1
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    More about this item

    Keywords

    Stock exchanges; Efficiency; Data envelopment analysis; Window analysis; Convergence;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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