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Efficient market hypothesis in emerging markets: Panel data evidence with multiple breaks and cross sectional dependence

Author

Listed:
  • Abd Halim Ahmad

    () (Universiti Utara Malaysia)

  • Siti Nurazira Mohd Daud

    () (Universiti Sains Islam Malaysia)

  • W.N.W. Azman-Saini

    () (Universiti Putra Malaysia)

Abstract

The purpose of this paper is to re-examine whether mean reversion property hold for 15 emerging stock markets for the period 1985 to 2006. Utilizing a panel stationarity test that is able to account for multiple structural breaks and cross sectional dependence, we find that the emerging stock markets follow a random walk process. However, further analysis on individual series show that the majority of stock prices in emerging markets are governed by a mean reverting process. This result, which is inconsistent with efficient market hypothesis, suggests that past information is useful in predicting future prices in most of the markets.

Suggested Citation

  • Abd Halim Ahmad & Siti Nurazira Mohd Daud & W.N.W. Azman-Saini, 2010. "Efficient market hypothesis in emerging markets: Panel data evidence with multiple breaks and cross sectional dependence," Economics Bulletin, AccessEcon, vol. 30(4), pages 2987-2995.
  • Handle: RePEc:ebl:ecbull:eb-10-00358
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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P274.pdf
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    References listed on IDEAS

    as
    1. Josep Lluís Carrion-i-Silvestre & Tomás del Barrio-Castro & Enrique López-Bazo, 2005. "Breaking the panels: An application to the GDP per capita," Econometrics Journal, Royal Economic Society, vol. 8(2), pages 159-175, July.
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    Cited by:

    1. Ushna Akber & Nabeel Muhammad, 2014. "Is Pakistan Stock Market Moving towards Weak-Form Efficiency? Evidence from The Karachi Stock Exchange and the Random Walk Nature of Free-Float of Shares of KSE 30 Index," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(6), pages 808-836, June.
    2. Akber, Ushna & Muhammad, Nabeel, 2013. "Is Pakistan Stock Market moving towards Weak-form efficiency? Evidence from the Karachi Stock Exchange and the Random Walk Nature of free-float of shares of KSE 30 Index," MPRA Paper 49128, University Library of Munich, Germany.

    More about this item

    Keywords

    Efficient market hypothesis; multiple breaks; cross sectional dependence;

    JEL classification:

    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets

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