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Testing Weak Form Market Efficiency Of Emerging Markets: A Nonlinear Approach

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  • Ece C. KARADAGLI
  • Nazlı C. OMAY

Abstract

This paper examines weak form efficiency in eight CEE emerging markets by testing whether the stock price series of these markets contain unit root. The unpredictability of stock returns indicates that stock prices follow random walk and hence are characterized by a unit root. For this purpose, we employ unit root and nonlinear unit root tests along with their panel extensions. The results indicate weak form efficiency in linear sense. However the findings of nonlinear unit root test suggest inefficiencies for Russian, Romanian and Polish stock markets. Furthermore, nonlinear panel unit root test support inefficiency for the sample we investigated.

Suggested Citation

  • Ece C. KARADAGLI & Nazlı C. OMAY, 2012. "Testing Weak Form Market Efficiency Of Emerging Markets: A Nonlinear Approach," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 7(3(21)/ Fa), pages 235-245.
    • Handle: RePEc:ush:jaessh:v:7:y:2012:i:3(21)_fall2012:p:235
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    Cited by:

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    2. Laura Raisa Miloş & Cornel Haţiegan & Marius Cristian Miloş & Flavia Mirela Barna & Claudiu Boțoc, 2020. "Multifractal Detrended Fluctuation Analysis (MF-DFA) of Stock Market Indexes. Empirical Evidence from Seven Central and Eastern European Markets," Sustainability, MDPI, vol. 12(2), pages 1-15, January.
    3. Yao, Can-Zhong & Mo, Yi-Na & Zhang, Ze-Kun, 2021. "A study of the efficiency of the Chinese clean energy stock market and its correlation with the crude oil market based on an asymmetric multifractal scaling behavior analysis," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).

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    More about this item

    Keywords

    emerging markets; market efficiency; linear and nonlinear unit root and linear and nonlinear panel unit root;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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