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Are the Transition Stock Markets Efficient? Evidence from Non-Linear Unit Root Tests

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  • Mubariz Hasanov
  • Tolga Omay

Abstract

In this paper we address efficiency of eight transition stock markets, namely, Bulgarian, Chinese, Czech, Hungarian, Polish, Romanian, Russian and Slovakian stock markets by testing whether the price series of these markets contain unit root. For this purpose we employ the nonlinear unit root test procedure recently developed by Kapetanios et al. (2003) that has a better power than standard unit root tests when series under consideration are characterised by a slower speed of mean reversion. The results of nonlinear unit root tests indicate that only Bulgarian, Czech, Hungarian and Slovakian price series contain unit root, consistent with weak form efficiency.

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Bibliographic Info

Article provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its journal Central Bank Review.

Volume (Year): 7 (2007)
Issue (Month): 2 ()
Pages: 1-12

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Handle: RePEc:tcb:cebare:v:7:y:2007:i:2:p:1-12

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Keywords: Market Efficiency; Non-linear models; transition markets;

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References

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  1. Rockinger, Michael & Urga, Giovanni, 2000. "A Time Varying Parameter Model to Test for Predictability and Integration in Stock Markets of Transition Economies," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2346, C.E.P.R. Discussion Papers.
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  6. Xiaming Liu & Haiyan Song & Peter Romilly, 1997. "Are Chinese stock markets efficient? A cointegration and causality analysis," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 4(8), pages 511-515.
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Citations

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Cited by:
  1. Bildirici, Melike & Ersin, Özgür, 2012. "Nonlinear volatility models in economics: smooth transition and neural network augmented GARCH, APGARCH, FIGARCH and FIAPGARCH models," MPRA Paper 40330, University Library of Munich, Germany, revised May 2012.
  2. Victor Dragota & Dragos Stefan Oprea, 2014. "Informational Efficiency Tests on the Romanian Stock Market: A Review of the Literature," 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, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 6(1), pages 015-028, June.
  3. Van Heerden, Dorathea & Rodrigues, Jose & Hockly, Dale & Lambert, Bongani & Taljard, Tjaart & Phiri, Andrew, 2013. "Efficient Market Hypothesis in South Africa: Evidence from a threshold autoregressive (TAR) model," MPRA Paper 50544, University Library of Munich, Germany.
  4. Gozbasi, Onur & Kucukkaplan, Ilhan & Nazlioglu, Saban, 2014. "Re-examining the Turkish stock market efficiency: Evidence from nonlinear unit root tests," Economic Modelling, Elsevier, Elsevier, vol. 38(C), pages 381-384.
  5. Omay, Tolga, 2010. "A Nonlinear New Approach to Investigating Crisis: A Case from Malaysia," MPRA Paper 20738, University Library of Munich, Germany.

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