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An empirical analysis of the informational efficiency of Australian equity markets


  • Abdulnasser Hatemi-J
  • Bryan Morgan


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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    References listed on IDEAS

    1. Engle, Robert F. & Patton, Andrew J., 2004. "Impacts of trades in an error-correction model of quote prices," Journal of Financial Markets, Elsevier, vol. 7(1), pages 1-25, January.
    2. Michael Aitken & Amaryllis Kua & Philip Brown & Terry Watter & H. Y. Izan, 1995. "An Intraday Analysis of the Probability of Trading on the ASX at the Asking Price," Australian Journal of Management, Australian School of Business, vol. 20(2), pages 115-154, December.
    3. Gemmill, Gordon, 1996. " Transparency and Liquidity: A Study of Block Trades on the London Stock Exchange under Different Publication Rules," Journal of Finance, American Finance Association, vol. 51(5), pages 1765-1790, December.
    4. Heflin, Frank & Shaw, Kenneth W., 2000. "Blockholder Ownership and Market Liquidity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(04), pages 621-633, December.
    5. Keim, Donald B & Madhaven, Ananth, 1996. "The Upstairs Market for Large-Block Transactions: Analysis and Measurement of Price Effects," Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 1-36.
    6. Lease, Ronald C & Masulis, Ronald W & Page, John R, 1991. " An Investigation of Market Microstructure Impacts on Event Study Returns," Journal of Finance, American Finance Association, vol. 46(4), pages 1523-1536, September.
    7. Jennifer S. Conrad, 2001. "Institutional Trading and Soft Dollars," Journal of Finance, American Finance Association, vol. 56(1), pages 397-416, February.
    8. Ellis, Katrina & Michaely, Roni & O'Hara, Maureen, 2000. "The Accuracy of Trade Classification Rules: Evidence from Nasdaq," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(04), pages 529-551, December.
    9. Harris, Lawrence, 1989. "A Day-End Transaction Price Anomaly," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(01), pages 29-45, March.
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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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