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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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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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Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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  11. Cheung, Kwong-C & Coutts, J Andrew, 2001. "A Note on Weak Form Market Efficiency in Security Prices: Evidence from the Hong Kong Stock Exchange," Applied Economics Letters, Taylor and Francis Journals, vol. 8(6), pages 407-10, June. [Downloadable!] (restricted)
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  15. Nicolaas Groenewold & Mohamed Ariff, 1998. "The Effects Of De-Regulation On Share-Market Efficiency In The Asia-Pacific," International Economic Journal, Korean International Economic Association, vol. 12(4), pages 23-47, December. [Downloadable!] (restricted)
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