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Weak-form market efficiency in European emerging and developed stock markets

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Author Info

  • Andrew C. Worthington
  • Helen Higgs

Abstract

This paper tests for random walks and weak-form market efficiency in European equity markets. Daily returns for sixteen developed markets (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom) and four emerging markets (Czech Republic, Hungary, Poland and Russia) are examined for random walks using a combination of serial correlation coefficient and runs tests, Augmented Dickey-Fuller (ADF), Phillips-Perron (PP) and Kwiatkowski, Phillips, Schmidt and Shin (KPSS) unit root tests and multiple variance ratio (MVR) tests. The results, which are in broad agreement across the approaches employed, indicate that of the emerging markets only Hungary is characterized by a random walk and hence is weak-form efficient, while in the developed markets only Germany, Ireland, Portugal, Sweden and the United Kingdom comply with the most stringent random walk criteria.

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File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2003/DP%20159%20Worthington%20&%20Higgs.pdf
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Bibliographic Info

Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 159.

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Date of creation: 20 Sep 2003
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Handle: RePEc:qut:dpaper:159

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Related research

Keywords: Developed and emerging markets; random walk hypothesis; market efficiency;

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References

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  1. Hyun-Jung Ryoo & Graham Smith, 2002. "Korean stock prices under price limits: variance ratio tests of random walks," Applied Financial Economics, Taylor & Francis Journals, vol. 12(8), pages 545-553.
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  4. Nicolaas Groenewold & Mohamed Ariff, 1998. "The Effects of De-Regulation on Share-Market Efficiency in the Asia-Pacific," International Economic Journal, Taylor & Francis Journals, vol. 12(4), pages 23-47.
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  7. Buguk, Cumhur & Wade Brorsen, B., 2003. "Testing weak-form market efficiency: Evidence from the Istanbul Stock Exchange," International Review of Financial Analysis, Elsevier, vol. 12(5), pages 579-590.
  8. Ser-Huang Poon, 1996. "Persistence and mean reversion in UK stock returns," European Financial Management, European Financial Management Association, vol. 2(2), pages 169-196.
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  12. Chow, K. Victor & Denning, Karen C., 1993. "A simple multiple variance ratio test," Journal of Econometrics, Elsevier, vol. 58(3), pages 385-401, August.
  13. Kwong-C. Cheung & J. Andrew Coutts, 2001. "A note on weak form market efficiency in security prices: evidence from the Hong Kong stock exchange," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 407-410.
  14. Karemera, David & Ojah, Kalu & Cole, John A, 1999. " Random Walks and Market Efficiency Tests: Evidence from Emerging Equity Markets," Review of Quantitative Finance and Accounting, Springer, vol. 13(2), pages 171-88, September.
  15. Ayadi, O. Felix & Pyun, C. S., 1994. "An application of variance ratio test to the Korean securities market," Journal of Banking & Finance, Elsevier, vol. 18(4), pages 643-658, September.
  16. Kawakatsu, Hiroyuki & Morey, Matthew R, 1999. "An Empirical Examination of Financial Liberalization and the Efficiency of Emerging Market Stock Prices," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 22(4), pages 385-411, Winter.
  17. Appiah-Kusi, Joe & Menyah, Kojo, 2003. "Return predictability in African stock markets," Review of Financial Economics, Elsevier, vol. 12(3), pages 247-270.
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Citations

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Cited by:
  1. Mobarek, Asma & Fiorante, Angelo, 2014. "The prospects of BRIC countries: Testing weak-form market efficiency," Research in International Business and Finance, Elsevier, vol. 30(C), pages 217-232.
  2. Batuo Enowbi, Michael & Guidi, Francesco & Mlambo, Kupukile, 2009. "Testing the weak-form market efficiency and the day of the week effects of some African countries," MPRA Paper 19116, University Library of Munich, Germany.
  3. Jan Hájek, 2007. "Czech Capital Market Weak-Form Efficiency, Selected Issues," Prague Economic Papers, University of Economics, Prague, vol. 2007(4), pages 303-318.
  4. Radosław Cholewiński, 2009. "Real-Time Market Abuse Detection with a Stochastic Parameter Model," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 1(3), pages 261-284, November.

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