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Market capitalization and efficiency. Does it matter? Evidence from the Athens Stock Exchange

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  • Theodore Panagiotidis

Abstract

The efficient market hypothesis (EMH) is tested in the case of the Athens Stock Exchange (ASE) after the introduction of the euro for three different indices. The underlying assumption is that stock prices would be more transparent; their performance easier to compare; the exchange rate risk eliminated and as a result we expect the new currency to strengthen the argument in favour of the EMH. The FTSE/ASE20, which consists of 'high capitalization' companies, the FTSE/ASE Mid 40, which consists of medium sized companies and the FTSE/ASE Small Cap, which covers the next 80 companies, are used. Five statistical tests are employed to test the residuals of the random walk model: the BDS, McLeod-Li, Engle LM, Tsay and Bicovariance test. Bootstrap as well as asymptotic values of these tests are estimated. The random walk hypothesis is rejected in all three cases and alternative GARCH models are estimated.

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  • Theodore Panagiotidis, 2005. "Market capitalization and efficiency. Does it matter? Evidence from the Athens Stock Exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 15(10), pages 707-713.
  • Handle: RePEc:taf:apfiec:v:15:y:2005:i:10:p:707-713 DOI: 10.1080/09603100500107883
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    References listed on IDEAS

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    Cited by:

    1. Cheteni, Priviledge, 2013. "Non-linearity behaviour of the ALBI Index: A case of Johannesburg Stock Exchange in South Africa," MPRA Paper 56369, University Library of Munich, Germany.
    2. Romero-Meza, Rafael & Bonilla, Claudio & Benedetti, Hugo & Serletis, Apostolos, 2015. "Nonlinearities and financial contagion in Latin American stock markets," Economic Modelling, Elsevier, vol. 51(C), pages 653-656.
    3. Theodore Panagiotidis, 2010. "Market efficiency and the Euro: the case of the Athens stock exchange," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, pages 237-251.
    4. Sajjad Rasoul & Coakley Jerry & Nankervis John C, 2008. "Markov-Switching GARCH Modelling of Value-at-Risk," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 12(3), pages 1-31, September.
    5. T Tang, 2009. "Testing for Non-linearity in the Balancing Item of Balance of Payments Accounts: The Case of 20 Industrial Countries," Economic Issues Journal Articles, Economic Issues, vol. 14(2), pages 107-124, September.
    6. Lim, Kian-Ping & Brooks, Robert D. & Hinich, Melvin J., 2008. "Nonlinear serial dependence and the weak-form efficiency of Asian emerging stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(5), pages 527-544, December.
    7. Claudia Sanhueza & Dante Contreras & Angela Denis, 2012. "Terremoto y sus efectos sobre el bienestar: un análisis multidimensional," Working Papers 35, Facultad de Economía y Empresa, Universidad Diego Portales.
    8. Silvio John Camilleri & Christopher J. Green, 2005. "An Analysis of the Impacts of Non-Synchronous Trading On," Finance 0504020, EconWPA.
    9. Kian-Ping Lim & Weiwei Luo & Jae H. Kim, 2013. "Are US stock index returns predictable? Evidence from automatic autocorrelation-based tests," Applied Economics, Taylor & Francis Journals, vol. 45(8), pages 953-962, March.
    10. Vinodh Madhavan, 2014. "Investigating the nature of nonlinearity in Indian Exchange Traded Funds (ETFs)," Managerial Finance, Emerald Group Publishing, vol. 40(4), pages 395-415, March.

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