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An empirical analysis of the informational efficiency of Australian equity markets

Author

Listed:
  • Abdulnasser Hatemi-J
  • Bryan Morgan

Abstract

Purpose - The purpose of this paper is to investigate whether the Australian equity market is informationally efficient in the semi-strong form with regard to interest rates and the exchange rate shocks during the period 1994-2006. Design/methodology/approach - There is evidence that the data are non-normal and that autoregressive conditional heteroskedasticity (ARCH) effects exist and in such circumstances, standard estimation methods are not reliable. A new method introduced by Hacker and Hatemi-J which is robust to non-normality and the presence of ARCH is applied. Findings - The results show the Australian equity market is not informationally efficient with regard to either the interest rate or the exchange rate. Originality/value - The empirical findings, in contrast to several previous studies, imply that the possibility for arbitrage profits in the equity market might exist.

Suggested Citation

  • Abdulnasser Hatemi-J & Bryan Morgan, 2009. "An empirical analysis of the informational efficiency of Australian equity markets," Journal of Economic Studies, Emerald Group Publishing, vol. 36(5), pages 437-445, September.
  • Handle: RePEc:eme:jespps:v:36:y:2009:i:5:p:437-445
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    Cited by:

    1. Ali Koçyigit & Mustafa Ercan Kiliç & Tayfur Bayat, 2015. "A Causality Test on the Gibson Paradox in Turkey," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(10), pages 1134-1147, October.

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