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Can a Stock Index be Less Efficient than Underlying Shares? An Analysis Using Malta Stock Exchange Data

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  • Silvio John Camilleri

    (Banking & Finance Dept., FEMA - University of Malta)

Abstract

Researchers often assume that stock market indices are the best possible yardstick in terms of market efficiency. The paper investigates this concept using data from the Malta Stock Exchange (MSE). The fact that a significant number of MSE shares do not trade everyday, may imply that the most liquid shares on this exchange are more efficient than the market index, whose value is dependent on shares of varying liquidity levels - including the less liquid ones. The paper applies various tests to compare the pricing efficiency of the MSE Index to that of the most liquid share quoted on the exchange. It is found that the MSE Index is still more efficient than the latter share.

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File URL: http://128.118.178.162/eps/fin/papers/0507/0507006.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0507006.

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Length: 21 pages
Date of creation: 05 Jul 2005
Date of revision:
Handle: RePEc:wpa:wuwpfi:0507006

Note: Type of Document - pdf; pages: 21
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Web page: http://128.118.178.162

Related research

Keywords: Malta Stock Exchange; Non-Synchronous Trading; Stock Markets.;

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  1. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
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