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Time-varying global financial market inefficiency: an instance of pre-, during, and post-subprime crisis

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  • Rahul Roy

    (Department of Commerce - Université de Pondichéry)

  • Shijin Santhakumar

    (Department of Commerce - Université de Pondichéry)

Abstract

The informational efficiency is the central backdrop among researchers in the quest of behavioral finance since Fama (J Financ 25:383–417, 1970). The succession of time has witnessed the dramatic transformation in the field of global stock markets over the years, and subsequently the liberalization– privatization–globalization played the role of catalyst to form the global stock market convergence. Predominantly, the financial liberalization in the foreign policies over the last two decades enabled the institutional and rational investors to diversify their risk through holding different classes of asset, forming the portfolio. However, the availability of investment opportunity sets to investor in two stock markets subsequently results in portfolio diversification, and hence arbitrage occurs simultaneously across the two markets (Ito et al., Appl Financ 46(23):2744–2754, 2014). The country risk premium and world risk premium in segmented market and integrated market concurrently vary, and thus it is perceivable to examine the joint efficiency among the various stock markets when markets are highly integrated. This study aims to analyze the time-varying structure of world market dynamic linkages and the persistence of global financial market inefficiency present during an instance of subprime crisis.

Suggested Citation

  • Rahul Roy & Shijin Santhakumar, 2014. "Time-varying global financial market inefficiency: an instance of pre-, during, and post-subprime crisis," Post-Print hal-01660506, HAL.
    • Handle: RePEc:hal:journl:hal-01660506
    DOI: 10.1007/s40622-014-0061-1
    Note: View the original document on HAL open archive server: https://hal.science/hal-01660506
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    References listed on IDEAS

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    5. Alexandru Todea & Dorina Lazar, 2012. "Global Crisis and Relative Efficiency: Empirical Evidence from Central and Eastern European Stock Markets," 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. 4(1), pages 045-053, June.
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    Cited by:

    1. João Paulo Vieito & Wing-Keung Wong & Zhen-Zhen Zhu, 2016. "Could the global financial crisis improve the performance of the G7 stocks markets?," Applied Economics, Taylor & Francis Journals, vol. 48(12), pages 1066-1080, March.
    2. Shariq Ahmad Bhat, 2018. "Informational efficiency of sovereign bond markets of India and China: evidence from Toda and Yamamoto Granger causality (1995)," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 45(4), pages 313-323, December.

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