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A multivariate test for stock market efficiency: the case of ASE

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  • Manolis Kavussanos
  • Everton Dockery

Abstract

Market efficiency tests in developing markets display mixed evidence, in contrast to evidence on developed markets where the null hypothesis seems to be supported. Specifically, previous tests for market efficiency on the index and on samples of stocks traded in the Athens Stock Exchange (ASE) are broadly not supportive of the efficient market hypothesis. This paper introduces multivariate generalizations of the univariate Dickey-Fuller likelihood ratio tests to the class of Seemingly Unrelated Regressions, to investigate empirically the stock price efficiency of ASE. The method takes into account the contemporaneous correlation between stocks in the ASE, and avoids the sample biases which may result by considering only subsets of stocks listed in the exchange. Conclusively, the results confirm that the ASE is informationally inefficient, implying that past stock prices contain some information as to future price movements which investors may act on.

Suggested Citation

  • Manolis Kavussanos & Everton Dockery, 2001. "A multivariate test for stock market efficiency: the case of ASE," Applied Financial Economics, Taylor & Francis Journals, vol. 11(5), pages 573-579.
  • Handle: RePEc:taf:apfiec:v:11:y:2001:i:5:p:573-579 DOI: 10.1080/09603100010013006
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    Cited by:

    1. Kanellos Toudas & Athanasios Bellas, 2014. "Corporate Governance and its Effect on Firm Value and Stock Returns of Listed Companies on the Athens Stock Exchange," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 58-80.
    2. Dimitrios Thomakos & Michail Koubouros, 2008. "The Role of Realized Volatility in the Athens Stock Exchange," Working Papers 0020, University of Peloponnese, Department of Economics.
    3. Bo Qian & Khaled Rasheed, 2010. "Foreign exchange market prediction with multiple classifiers," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(3), pages 271-284.
    4. Anastassios A. Drakos & Georgios P. Kouretas & Leonidas P. Zarangas, 2010. "Forecasting financial volatility of the Athens stock exchange daily returns: an application of the asymmetric normal mixture GARCH model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 331-350.
    5. repec:mfj:journl:v:16:y:2011:i:1-2:p:87-124 is not listed on IDEAS
    6. Panayiotis Diamandis & Anastassios Drakos & Argyrios Volis, 2007. "The impact of stock incremental information on the volatility of the Athens stock exchange," Applied Financial Economics, Taylor & Francis Journals, pages 413-424.
    7. Majumder, Debasish, 2012. "When the market becomes inefficient: Comparing BRIC markets with markets in the USA," International Review of Financial Analysis, Elsevier, vol. 24(C), pages 84-92.
    8. Dimitrios D. Thomakos & Michail S. Koubouros, 2011. "The Role of Realised Volatility in the Athens Stock Exchange," Multinational Finance Journal, Multinational Finance Journal, vol. 15(1-2), pages 87-124, March - J.
    9. Lim, Kian-Ping & Brooks, Robert D. & Kim, Jae H., 2008. "Financial crisis and stock market efficiency: Empirical evidence from Asian countries," International Review of Financial Analysis, Elsevier, vol. 17(3), pages 571-591, June.
    10. Nikolaos Mylonidis & Ioanna Kelnikola, 2005. "Merging activity in the Greek Banking System: A Financial Accounting Perspective," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 3(1), pages 121-144.

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