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Market capitalization and efficiency. Does it matter? Evidence from the Athens Stock Exchange

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  • Theodore Panagiotidis

Abstract

The efficient market hypothesis (EMH) is tested in the case of the Athens Stock Exchange (ASE) after the introduction of the euro for three different indices. The underlying assumption is that stock prices would be more transparent; their performance easier to compare; the exchange rate risk eliminated and as a result we expect the new currency to strengthen the argument in favour of the EMH. The FTSE/ASE20, which consists of 'high capitalization' companies, the FTSE/ASE Mid 40, which consists of medium sized companies and the FTSE/ASE Small Cap, which covers the next 80 companies, are used. Five statistical tests are employed to test the residuals of the random walk model: the BDS, McLeod-Li, Engle LM, Tsay and Bicovariance test. Bootstrap as well as asymptotic values of these tests are estimated. The random walk hypothesis is rejected in all three cases and alternative GARCH models are estimated.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 15 (2005)
Issue (Month): 10 ()
Pages: 707-713

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Handle: RePEc:taf:apfiec:v:15:y:2005:i:10:p:707-713

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References

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  1. Theodore Panagiotidis, 2002. "Testing the assumption of Linearity," Economics Bulletin, AccessEcon, vol. 3(29), pages 1-9.
  2. Nicholas Apergis & Sophia Eleptheriou, 2001. "Stock returns and volatility: Evidence from the Athens Stock market index," Journal of Economics and Finance, Springer, Springer, vol. 25(1), pages 50-61, March.
  3. repec:att:wimass:9520 is not listed on IDEAS
  4. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, Elsevier, vol. 31(3), pages 307-327, April.
  5. Brooks, Chris & Henry, Olan T., 2000. "Can portmanteau nonlinearity tests serve as general mis-specification tests?: Evidence from symmetric and asymmetric GARCH models," Economics Letters, Elsevier, vol. 67(3), pages 245-251, June.
  6. Brooks, Chris & Heravi, Saeed M, 1999. "The Effect of (Mis-Specified) GARCH Filters on the Finite Sample Distribution of the BDS Test," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 13(2), pages 147-62, April.
  7. John Barkoulas & Nickolaos Travlos, 1998. "Chaos in an emerging capital market? The case of the Athens Stock Exchange," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 8(3), pages 231-243.
  8. Gregorios Siourounis, 2002. "Modelling volatility and testing for efficiency in emerging capital markets: the case of the Athens stock exchange," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(1), pages 47-55.
  9. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 987-1007, July.
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Cited by:
  1. Claudia Sanhueza & Dante Contreras & Angela Denis, 2012. "Terremoto y sus efectos sobre el bienestar: un análisis multidimensional," Working Papers 35, Facultad de Economía y Empresa, Universidad Diego Portales.
  2. Theodore Panagiotidis, 2005. "Market Efficiency and the Euro: The case of the Athens Stock Exchange," Finance, EconWPA 0507022, EconWPA.
  3. Lim, Kian-Ping & Brooks, Robert D. & Hinich, Melvin J., 2008. "Nonlinear serial dependence and the weak-form efficiency of Asian emerging stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 18(5), pages 527-544, December.
  4. Kian-Ping Lim & Weiwei Luo & Jae H. Kim, 2013. "Are US stock index returns predictable? Evidence from automatic autocorrelation-based tests," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 45(8), pages 953-962, March.
  5. Cheteni, Priviledge, 2013. "Non-linearity behaviour of the ALBI Index: A case of Johannesburg Stock Exchange in South Africa," MPRA Paper 56369, University Library of Munich, Germany.
  6. T Tang, 2009. "Testing for Non-linearity in the Balancing Item of Balance of Payments Accounts: The Case of 20 Industrial Countries," Economic Issues Journal Articles, Economic Issues, Economic Issues, vol. 14(2), pages 107-124, September.
  7. Silvio John Camilleri & Christopher J. Green, 2005. "An Analysis of the Impacts of Non-Synchronous Trading On," Finance, EconWPA 0504020, EconWPA.

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