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Evaluating Financial Development In Emerging Capital Markets With Efficiency Benchmarks

Author

Listed:
  • Andrew C. Worthington

    () (School of Accounting and Finance, University of Wollongong)

  • Helen Higgs

    () (Department of Accounting, Finance and Economics, Griffith University)

Abstract

This paper examines the weak-form market efficiency of twenty-seven emerging markets. The sample encompasses three markets in Africa (Egypt, Morocco and South Africa), ten in Asia (China, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines, Sri Lanka, Taiwan and Thailand), four in Europe (Czech Republic, Hungary, Poland and Russia), seven in Latin America (Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela) and three in the Middle East (Israel, Jordan and Turkey). Daily market returns are tested for random walks using 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 tests. The serial correlation and runs tests conclude that most emerging markets are weak-form inefficient. However, the unit root tests suggest the presence of weak-form efficiency in many emerging markets, but with some exceptions. The results from the most stringent multiple variance ratio tests are in general agreement with the serial correlation and runs tests. On this basis, only Hungary, Jordan and Israel are weak-form market efficient, with Egypt, Korea, Malaysia and Argentina meeting at least some of the requirements of a random walk.

Suggested Citation

  • Andrew C. Worthington & Helen Higgs, 2006. "Evaluating Financial Development In Emerging Capital Markets With Efficiency Benchmarks," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 31(1), pages 17-44, June.
  • Handle: RePEc:jed:journl:v:31:y:2006:i:1:p:17-44
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    Cited by:

    1. Rompotis, Gerasimos G., 2011. "Testing weak-form efficiency of exchange traded funds market," MPRA Paper 36020, University Library of Munich, Germany.
    2. Graham Smith & Aneta Dyakova, 2016. "The Relative Predictability of Stock Markets in the Americas," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 21(2), pages 131-142, April.
    3. repec:spr:fininn:v:3:y:2017:i:1:d:10.1186_s40854-017-0064-y is not listed on IDEAS

    More about this item

    Keywords

    Market Efficiency; Random Walks; Emerging Markets;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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